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TORONTO/HONG KONG (Reuters) - Chinese and other investors have approached at least one big Canadian pension manager about a bid for Canada's Potash Corp to rival BHP Billiton's $39 billion hostile offer.
Thursday's disclosure by Alberta Investment Management Corp, which manages some C$70 billion ($67 billion) in public sector pension funds, is one of the first pieces of hard evidence to back suspicions that China is looking for a way to derail a takeover of Potash Corp by the powerful Anglo-Australian miner.
In another sign of Chinese interest in countering BHP's $130-a-share offer, China's state-run chemical group Sinochem has hired HSBC to advise on its options, the Wall Street Journal said, while Saskatchewan, where Potash Corp is based, is seeking its own independent probe of the takeover.
China, which buys about 7 percent of the output of Potash Corp, fears a BHP takeover might jeopardize supplies it will require to feed its huge population in coming years.
Leo de Bever, chief executive of the Alberta public-sector pension manager, said he had fielded inquiries from a number of parties, including sovereign wealth funds.
He said Chinese investors were among those asking him to consider participating in a bid for Potash Corp, the No. 1 fertilizer supplier.
"We don't have any feeling of nationality of counter-parties. We work with people in other countries all the same, and we would be pleased to work with the Chinese entity if that made sense," said de Bever. But he also said AIMCo was not interested in a Potash deal at this point.
"We can't right now make the economics work," he told journalists in Calgary.
"If it were to work it would take a consortium of pension funds if you were to do it, but the question is, is that really appropriate for those pension funds."
The possibility of Chinese involvement in a valuable Canadian resource has raised concerns in Saskatchewan, which is worried that a takeover of its largest company by a foreign company could affect jobs and government revenue.
It said it had asked the Conference Board, a nonprofit research organization, to examine the effect of a takeover, including the conditions Saskatchewan might ask the federal government to impose on a deal and ways to mitigate risks from BHP's bid and any others that could come forward.
"We have done a lot of work on both foreign direct investment in Canada and on M&A in the past ... so we are probably as well equipped as any other organization to do this," Conference Board chief economist Glen Hodgson said.
"But the time-frame is tight, so we are going to have to go fast," he told Reuters. The board would provide recommendations, but focus on identifying implications and opportunities for the Prairie province, he added.
Saskatchewan Premier Brad Wall said in a television interview that the province may consider changes to its potash royalty system, in the event of a foreign takeover of Potash Corp.
"In the long term, there are royalty changes that are possible to take the bias away from prices and more toward volumes," Wall said in an interview with BNN Television.
The premier stressed that the province would clearly outline the implications for a foreign buyer that violates any of the conditions that come with an approval.
"At the end of the day there isn't any potash mined in the province without a license from the province of Saskatchewan and that's obviously a source of some leverage," he said.
Saskatchewan Energy Minister Bill Boyd has raised concerns about China buying into Potash Corp and about BHP's stated intent to eventually market its potash offshore on its own, rather than through the export consortium Canpotex.
"That is where some of the concern would be: having a customer whose interests obviously are to have very low prices," Boyd told Reuters this week.
Any changes to marketing or production could lower potash prices, which determine the size of Saskatchewan's royalties.
The province, which produces one-quarter of the world's potash, depends on those royalties for hundreds of millions of dollars a year and collected nearly C$1.4 billion in 2008-09 after potash prices spiked.
Sinochem has ranked near the top of the list of entities that analysts think could mount a competing bid, and the Wall Street Journal, citing sources close to the matter, confirmed the Chinese firm might be interested.
But it said the move to hire HBSC was preliminary and did not mean Sinochem would make a counterbid for Potash Corp.
Sinochem in Beijing was not available for comment, while HSBC in Hong Kong declined to comment.
A source close to the matter told Reuters in August that Potash Corp has held discussions with Sinochem. Potash has a 22 percent stake in Sinofert, a Sinochem subsidiary that is China's top fertilizer producer.
Rio Tinto, Brazil's Vale and Canada's Teck Resources are all seen as unlikely to get into a bidding war against BHP as they have other priorities or don't have the balance sheet strength.
That leaves big Canadian pension fund managers, including Ontario Teachers' Pension Plan and Canada Pension Plan Investment Board, as being among those with the wherewithal to mount a competing bid.
Potash Corp shares rose 1.9 percent on Thursday to $147.82 in New York The stock is nearly 14 percent above BHP's offer of $130 a share, with investors holding out for a higher offer.
BHP shares in London dipped 0.11 percent to close at 1,904.71 pence.
BHP shareholders polled by Reuters on average see $155 a share, or $46 billion, as the maximum BHP should pay for Potash Corp. Potash shareholders see $162 a share clinching a deal, according to a separate Reuters poll.
Additional reporting by Euan Rocha, Sonali Paul, Megan Davies, Alison Leung, Eric Onstad and Pav Jordan; Writing by Frank McGurty; Editing by Janet Guttsman and Rob Wilson