By Jeff Jones and Rod Nickel
CALGARY/Winnipeg, Manitoba (Reuters) - Chinese investors, among other unidentified parties, have approached at least one big Canadian pension manager about mounting a bid for Canada's Potash CorpI to rival BHP Billiton's $39 billion hostile offer.
The disclosure by Alberta Investment Management Corp is among the first pieces of hard evidence to back suspicions that China is looking for a way to derail a takeover of the No.1 fertilizer supplier by the powerful Anglo-Australian miner.
In another sign of Chinese interest in countering BHP's $130-a-share offer, state-run Sinochem hired HSBC for advice on its options regarding Potash Corp, the Wall Street Journal reported on Wednesday.
Meanwhile, the provincial government of Saskatchewan on Thursday said it commissioned an independent probe into the impact of the BHP proposal, including conditions Canada might consider imposing on any deal.
Leo de Bever, the chief executive of the Alberta public-sector pension manager, said on Thursday he had fielded inquiries from a number of parties including sovereign wealth funds. Later, de Bever told Canada's BNN Television that Chinese investors were among those parties asking him to consider participating in a Potash bid.
"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, who added that AimCo was not interested in a Potash deal at this point.
China, which buys about 7 percent of the output of Potash Corp, is concerned that a Potash Corp takeover by BHP might jeopardize supplies that it will require to feed its huge population as it prospers in the coming years.
Despite the stirrings, analysts are still skeptical that China, the world's top consumer of potash, will come to the rescue of Potash Corp.
"Above all the Chinese will not want to be rebuffed in any way. It was bad enough what happened to them with Rio Tinto so I would think they would be extremely cautious," said analyst Tom Gidley-Kitchin at Charles Stanley in London.
Rio Tinto last year scrapped a $19.5 billion equity and asset tie-up with Chinese state-owned aluminum group Chinalco.
JOBS AND REVENUE
Even so, the possibility of Chinese involvement in a valuable Canadian resource sector has also raised concerns in Saskatchewan, the western province that's home to the country's potash industry.
The province, which borders on Alberta, is worried that a takeover of its largest company by a foreign company could affect jobs and government revenue.
As a result it asked the Conference Board, a nonprofit research organization, to examine the effect of a BHP takeover on jobs and government revenues.
Bill Boyd, the provincial energy minister, has raised concerns about both China buying into Potash Corp as well as BHP's stated intent eventually to 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 in an interview this week.
Any changes to marketing or production levels could lower potash prices, which determine the size of the royalties Saskatchewan collects.
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 ($1.3 billion) in 2008-09 after potash prices spiked.
The board will also report on conditions that Saskatchewan could ask the federal government to impose on any takeover deal, as well as ways to mitigate risks from BHP's bid and any others that could come forward.
SINOCHEM SEEKS ADVICE
Sinochem, a Chinese state-run chemical group, has ranked near the top of the list of entities that analysts think could mount a competing bid.
The Wall Street Journal, citing sources close to the matter, confirmed that Sinochem might be interested. But the report stressed the move to hire HBSC was preliminary and did not mean the Chinese company had decided to make a counterbid for Potash Corp.
Sinochem in Beijing was not available for comment, while HSBC in Hong Kong declined to comment.
Potash Corp has held discussions with Sinochem, a source close to the matter told Reuters in August. Potash has a 22 percent stake in Sinofert, a subsidiary of Sinochem 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.
AIMCO NOT INTERESTED
Big Canadian pension fund managers, including Ontario Teachers' Pension Plan and Canada Pension Plan Investment Board, have also been mentioned among those with the wherewithal to mount a competing bid.
As for the Alberta fund manager, de Bever made it clear that AimCo was not interested 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."
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 on average see $155 a share, or $46 billion, as the maximum BHP should pay for Potash Corp, according to a Reuters poll, while Potash shareholders see $162 a share clinching a deal, according to a separate Reuters poll.
(Additional reporting by Megan Davies in New York, Alison Leung in Hong Kong, Eric Onstad in London, Jeff Jones in Calgary, Euan Rocha and Pav Jordan in Toronto; Writing by Frank McGurty)
