By Sonali Paul and Eric Onstad
MELBOURNE/LONDON (Reuters) - BHP Billiton, the world's biggest miner, fired a warning shot at its takeover target Potash Corp and potential counterbidders, showing off its best half-year profit in two years and a hefty balance sheet.
But BHP, pursuing a $39 billion hostile offer for the top global fertilizer maker, dampened down expectations that its cash pile meant it might substantially raise its bid.
"I will be as disciplined on this bid as I've been on every other endeavor," Chief Executive Marius Kloppers told a conference call with reporters on Wednesday.
"The shareholders own the company and it's my job to create more value for them, not to do any one thing at any cost."
The results confirmed BHP has the financial muscle to raise its $130 per share Potash offer, with net annual cash flows of $17.9 billion.
Net debt for the group, which has already lined up $45 billion in loans for the Potash deal, fell to $3.3 billion, with net gearing down to a mere 6 percent.
"BHP could probably go up to close to A$200 dollars ($177) a share (in its Potash Corp bid)," said Ric Ronge, portfolio manager at Pengana Capital in Australia.
"In the absence of another bidder for those assets, BHP is doing the right thing in the sense it's basically offered a price... and is waiting for a response."
One key question for shareholders will be whether BHP would be willing to raise its bid by more than 22 percent, which would require it to seek approval from its own shareholders for the deal under UK rules.
Potash Corp investors polled by Reuters said they would be willing to accept an offer around $162 a share, while many analysts think an offer around $157 would clinch a deal.
BHP is set to face questions from investors and analysts in London about the bid, launched a week ago.
Some shareholders worry about the risks BHP is taking on, expanding in a market it has never served, as it aims to tap an expected boom in demand for potash from farmers trying to boost crop yields to feed fast-growing countries like China and India.
"The question is not whether BHP can afford the bid. It's whether there's a strategic fit," said an investor who declined to be identified ahead of talking to Kloppers.
BUMPER PROFITS
Net profit before one-offs for January-June rose to $6.77 billion from $4.59 billion a year earlier, in line with analysts' forecasts of around $6.9 billion.
BHP shares in London rose 1.0 percent to 1822 pence by 0746 GMT (3:46 a.m. EDT), outperforming a 0.2 percent rise in the UK mining index
Potash Corp shares slipped 0.7 percent on Tuesday to $149.11, trading 15 percent above BHP's offer.
BHP said it was cautious on the short-term global outlook and that the economy in China, its biggest customer, would slow from recent highs.
"Following a broad recovery in prices for the majority of BHP Billiton's products, the short term outlook for commodities is mixed," the company said.
Kloppers sounded much less confident about winning regulatory approval for its planned iron ore joint venture with Rio Tinto that is billed to save the firms $10 billion in costs.
"Clearly over most of the last year, reality has turned out that it has been slower and more protracted than we would have anticipated."
The companies will have to consider what to do next if their agreements expire at the end of this year without having a regulatory outcome, he added.
INSIDER TRADING
BHP's bumper profits came as the U.S. Securities and Exchange Commission charged two Spanish residents with insider trading in Potash Corp shares before BHP announced its bid.
The SEC alleged that the Madrid, Spain residents, one of whom was an equities derivatives trader with BHP adviser Santander, made nearly $1.1 million in profits using material nonpublic information to illegally trade Potash securities before the BHP announcement.
BHP also plans to ask a Canadian commission to end Potash Corp's poison pill early if the bid appears likely to receive regulatory approval, sources familiar with the matter said.
Such a move would force the Canadian company to work faster as it seeks to line up a white knight to fend off the bid.
Kloppers did not sound worried about a possible counter-bidder. "I note with interest all of the media activity around potential other parties that could bid or would bid, but there is only one bid on the table today," he said.
Potash Corp adopted a 90-day shareholder rights plan last week in response to BHP's hostile bid.
The plan will trigger a massive dilution in shares if a single investor acquires a stake of more than 20 percent by giving existing shareholders the right to buy more Potash shares at a sharp discount.
But BHP can ask a provincial securities' commission to have the shareholder rights plan lifted early so it can take up shares tendered to its offer.
One source, who spoke on the condition of anonymity, said BHP could ask to have the pill removed within 30 to 45 days after its August 20 bid, which expires on October 19.
($1=1.130 Australian Dollar)
(Additional reporting by Rachelle Younglai in Washington; Editing by Lincoln Feast and Erica Billingham)