Chinese may prove 'white knight' with Potash bid

POTASH'S search for a "white knight" to trump BHP Billiton's $39 billion (£25bn) hostile bid for the world's largest fertiliser maker is likely to spark interest in China, where the product is key to feeding the vast nation.

One source said Potash was soliciting alternative bidders willing to pay more than the $130-a -share offered by BHP, the world's largest mining company.

The source said Potash was confident alternative bids would emerge for the leader of a sector with huge growth potential.

If BHP's bid is accepted by shareholders then Bill Doyle, Potash's chief executive, stands to make at least $370 million (273m) through the sale of his own stake in the company.

BHP officially kicked off its offer, taking out full-page advertisements in Canadian and US newspapers, and Potash advised its shareholders to ignore the bid until it could review the offer documents.

The takeover target said: "Potash's board will make a recommendation to shareholders regarding the offer, but in the meantime … advises shareholders not to take any action regarding the offer."

Potash - a term covering various potassium-containing compounds - is a crucial ingredient in producing better crop yields, key to China as its growing middle class increases its food consumption.

Shrinking amounts of arable land worldwide and China's own limited domestic supply of potash increase its importance in the world's most populous nation.

Potash, based in the Canadian province of Saskatchewan, declined to comment about possible counter-bidders.

Top Chinese fertiliser company Sinofert - in which Potash owns a 22 per cent stake - is the most logical candidate to lead a counter-offer, industry sources said. While Sinofert itself is small - its $3.8bn market value is less than a tenth of Potash's - its parent, Sinochem Group, is a huge state-owned firm. Sinochem's sales were $36bn last year.

A spokesman for Sinofert told one newspaper the firm would "pay close attention" to BHP's bid and added that the group "was interested in overseas potash investment opportunities".

Aluminium giant Chalco and state-backed chemicals firm ChemChina could also emerge as potential bidders, sources said.

One Asia-based investment banker - who has advised Chinese resources companies on overseas deals - said: "I assure you there are numerous organisations in China who would chase potash.

"China has very few potash reserves for itself, it's a commodity which they're going to be in short supply of. And, does China want to be over the barrel on yet another commodity?"

BHP's close rival, Rio Tinto, had also been touted as a potential white knight for Potash. Rio chief executive Tom Albanese declined comment yesterday.