By Zhou Xin and Michael Erman
BEIJING/NEW YORK (Reuters) - China's state-owned Sinochem Corp appears unwilling to make a bid for Potash Corp, even as Beijing voiced concern over BHP Billiton's $39 billion bid for the Canadian firm on Wednesday.
Sinochem would instead consider buying some of Potash Corp's assets such as its nitrogen or phosphates businesses as an acquisition of the fertilizer giant would not be a good deal, a senior Sinochem official was quoted telling an influential Chinese magazine.
China, which typically buys about 7 percent of the output of Potash Corp, the world's largest fertilizer maker, fears a BHP takeover might push up the cost of fertilizers crucial to boosting food production for its huge population.
That has fed speculation that a major state-owned Chinese company might try to stymie BHP's hostile takeover bid by launching a rival offer or by buying a blocking stake in Potash Corp, with market talk centering on Sinochem.
Han Gensheng, in charge of Sinochem's overseas deals, was quoted by business magazine Caijing as saying even a bid of $10 billion would be too large for Sinochem, parent of China's largest fertilizer distributor, Sinofert Holdings.
China voiced concern about the deal on Wednesday, with the Ministry of Commerce saying it would closely watch BHP's bid for Potash Corp and would investigate the deal if Beijing received a formal application for approval.
"Such a deal will definitely be a concern for the global potash industry, including China's potash industry," ministry spokesman Yao Jian told a regular news conference.
Yao said neither Sinochem nor any other Chinese firm had notified the ministry of a possible counterbid for Potash Corp.
"We have not received any material or information from any individual domestic company," he said.
BID BLOCKING
Bankers have downplayed the prospect of a Chinese counterbid, saying Canada would be concerned about a customer taking over Potash Corp with the aim of keeping potash prices low.
Bankers also say any counterbid would have to exceed $45 billion, a massive price, to outgun BHP's balance sheet.
"That's a lot of money for any organization," said a resources banker not involved in the deal.
Caijing cited unnamed Sinochem sources as saying that Sinochem had written to the State Council, the cabinet, seeking support from the country's sovereign wealth fund CIC or China's state lenders if Sinochem decided to bid for Potash Corp.
The cabinet did not reply directly and had required Sinochem to work on a detailed feasibility report, the magazine said.
Chinese officials have ordered state-owned companies to meet investment bankers to explore potential options to block BHP's bid for Potash, and Sinochem has approached Singaporean state investor Temasek Holdings to join a consortium that may make a bid, sources have told Reuters.
Potash Corp is confident it will get a better offer than BHP's bid of $130 a share.
"We believe BHP will not be the only bidder in this process, as we continue to seek to maximize value for all of our shareholders," Chief Executive Bill Doyle said in a letter to Potash Corp employees on Monday.
Potash shares last traded at $148.44, 14 percent above BHP's offer. BHP's shares rose 1 percent to A$39.44.
Caijing reported that Sinochem was considering four options. The first option was to file a bid for Potash Corp directly to compete against BHP, but it noted that would be too expensive and would run into Canadian regulatory hurdles.
The second option would be to work with other potential partners, including Rio Tinto, Vale, Teck Resources and Cameco Corp.
The third was to work with BHP and the fourth for Sinochem to invest $10-13 billion to buy preferred shares or convertible bonds issued by Potash Corp to become a strategic investor, the magazine said.
The last option appeared to be unlikely, according to Potash Corp investors who were briefed on Tuesday.
Potash Corp is not considering selling a large stake to a third party or setting up long-term production sharing agreements to block BHP's hostile bid, investors said.
That would mean that China or other rival bidders would have to consider a full takeover of Potash Corp or look to acquire a blocking stake from existing investors if they want to scupper BHP's offer.
(Additional reporting and writing by Sonali Paul in Melbourne; Editing by Mark Bendeich and Valerie Lee)
