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A train car waits in line at Potash Corp.'s Cory mine near Saskatoon.


Potash Corp. of Saskatchewan Inc. insists another suitor will come forward to rival BHP Billiton Ltd. 's $38.6-billion (U.S.) hostile offer, playing up the prospects for a bidding war that would lead to a higher price for its world-renowned fertilizer assets.

Potash Corp. chief executive officer Bill Doyle took to the Internet Tuesday to insist that BHP "will not be the only bidder," as talks intensified behind the scenes to create a competing offer, likely led by Chinese state-owned chemical conglomerate Sinochem Group.

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Sinochem is weighing a potential counter-bid to BHP's unsolicited offer, and has approached possible partners including pension funds and other resource companies, according to people familiar with the matter. Singapore sovereign wealth fund Temasek was invited by Sinochem to join a consortium that may make an offer for the Saskatoon-based company, the world's largest fertilizer firm, a Reuters report said Tuesday.

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Since BHP's offer was first revealed on Aug. 17, no rival bids have emerged. Major Potash Corp. shareholders see BHP's $130 per-share offer as a "non-starter," Mr. Doyle said, while BHP has said its offer is "full and fair." Mr. Doyle has been meeting with Potash Corp.'s large shareholders and said some are buying more shares, likely in anticipation of a higher offer price.

The bold statements aren't unexpected for the outspoken Potash Corp. CEO, as he tries to stir up competition in a takeover battle. However, if a rival offer doesn't surface, Mr. Doyle risks angering shareholders if Potash shares drop from current levels. Potash Corp. shares have for weeks traded above BHP's offer price of $130 (U.S.) a share on the expectation of a higher bid. The shares closed at $149.49 Tuesday on the New York Stock Exchange.

Mr. Doyle maintained Tuesday that his firm could still succeed as a standalone company, but that it's not the scenario unfolding at this stage.

"A number of third parties have already expressed interest in alternative transactions, some who we approached and others who initiated contact on their own," Mr. Doyle, 60, said in a video clip posted on Potash Corp.'s website and the video-sharing website YouTube. Major Potash Corp. shareholders see BHP's $130 per-share offer as a "non-starter," Mr. Doyle said.

As both sides dig in their heels, for now, Mr. Doyle warned it could take time for a rival bid to surface, saying: "We anticipate that the process will be more like a marathon than a sprint."

Shareholders are weighing the prospects for a competing bid and what price another bidder would pay.

"The stock market seems to say the bid is too low. You have to wonder, if there is nobody else coming in and they don't raise the bid … do you sell now, or do you sell later? That is the question investors have to look at," said Stephen Jarislowsky, chairman of money manager Jarislowsky Fraser Ltd., Potash Corp.'s third-largest shareholder at about 3 per cent. "My duty to existing clients is price … I would like to get a higher price."

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A source close to Potash Corp. said the fertilizer giant is considering several possible scenarios that could rival or stymie BHP's hostile offer. These options include another company, such as a Chinese state-owned enterprise or an investment fund acquiring a significant equity interest in Potash Corp., in exchange for an output agreement guaranteeing a supply of the commodity, which is used to improve crop yields.

Another scenario would see a consortium of bidders comprised of both Chinese and Western interests teaming up to launch an offer topping BHP's bid. Even the possibility of a management buyout, bankrolled by deep-pocketed foreign firms with support from domestic funds or companies, is still on the table.

"Everything is being looked at. That would include strategic stakes and that would include selling the whole company," said the source, who is involved in the discussions.

The source said that it is too early to count out involvement in a bid by other major mining or fertilizer companies and also said that a bid could come from a consortium of interested parties. "The more parties there are, the more difficult it is to keep them together. That doesn't mean that two or three couldn't team up," he added.

A full-blown takeover bid from a Chinese state-owned enterprise (SOE) such as Sinochem is widely expected to face opposition from both the provincial and federal governments. Last week, the Saskatchewan government said it would have concerns about a state-owned buyer coming in and driving down the price of potash, with a goal of securing supply and feeding its people at the lowest price possible.

The province has asked the Conference Board of Canada to review the implications for the province if Potash Corp. is sold.

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Those working on Potash's defensive tactics believe that a rival bid that includes backing from a Chinese SOE such as Sinochem could still win government approval as long the parties are clear about their intentions for Potash Corp.'s assets and make undertakings that would protect jobs and revenue for the province, which currently derives about 15 per cent of its revenue in royalties and taxes from the potash sector.

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About the Authors

Brenda Bouw is a freelance writer and editor based in Vancouver. She has more than 20 years of experience as a business reporter, including at The Globe and Mail, The Canadian Press, the Financial Post and was executive producer at BNN (formerly ROBTv). Brenda was also part of the Globe and Mail reporting team that won the 2010 National Newspaper Award for business journalism. More

Asia-Pacific Reporter

An award-winning journalist, Andy Hoffman is the Asia-Pacific Reporter for Canada's national newspaper, The Globe and Mail. More

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