BHP says any Potash bid must offer shareholder value

TORONTO Tue Sep 21, 2010 7:26pm EDT

Marius Kloppers, chief executive officer of BHP Billiton, is broadcasted as he gives a speech in London as Alex Vanselow, chief financial officer listens, in Sydney August 25, 2010. REUTERS/Daniel Munoz

Marius Kloppers, chief executive officer of BHP Billiton, is broadcasted as he gives a speech in London as Alex Vanselow, chief financial officer listens, in Sydney August 25, 2010.

Credit: Reuters/Daniel Munoz

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TORONTO (Reuters) - BHP Billiton would rather drop its efforts to buy Potash Corp than raise its $39 billion offer to a level that exceeds good value for BHP shareholders, its chief executive said on Tuesday.

That said, CEO Marius Kloppers insisted he was unconcerned by the possibility of a rival bid emerging for the world's No.1 fertilizer producer, even as more reports surfaced pointing to China's keen interest in derailing BHP's quest.

Instead, BHP remains squarely focused on garnering the political support and regulatory clearance needed for its bid to fly in Canada and elsewhere, Kloppers said.

Asked by Canada's Business News Network if BHP would walk away from its $130-a-share offer if the bidding became too rich, Kloppers responded: "Absolutely."

"If somebody offers a price at which we cannot demonstrate value for our shareholders, we're probably not going to show, and I think that continues to be the case," Kloppers said.

Kloppers, in a separate interview with Canada's Globe and Mail newspaper, said BHP was sticking with its plan to drop out of the Canpotex potash marketing cartel -- effectively triggering its demise - if its bid succeeds.

The BHP chief spent the day in Toronto, Canada's financial hub, aiming to drum up support for its bid, mostly behind closed doors.

Seeking to allay concerns that its strategy would hurt Potash's home province of Saskatchewan, Kloppers said all low-cost producers there would benefit from market-based pricing. That in turn would generate more revenue for the province, not less, he said.

Still, BHP would not move quickly to dismantle the organization, sources working closely on the deal told Reuters.

"There are lot of things that Canpotex does that involved shared logistics, which BHP thinks are very important for the competitiveness of Saskatchewan," said one of the sources. "Not only would BHP not want to do anything that would risk this, it would want to look at ways to protect it more."

BHP would like to transition Canpotex into an infrastructure-sharing club, a gradual process that could take years, said the sources, who were not authorized to speak on the record.

Potash Corp, based in Saskatoon, Saskatchewan, has already rejected BHP's offer as being too low, and media reports have suggested that rival offers, perhaps led by a Chinese entities, could materialize.

The company's shares on Tuesday fell 95 cents to close at $147.52 in New York but the stock is trading well above the $130 offer price, suggesting investors anticipate a richer offer will eventually emerge.

CANPOTEX HURDLE

Rather than being worried about the possibility of other offers, Kloppers said BHP is currently focused on clearing regulatory hurdles in both Canada and the United States.

BHP said on Monday it has extended its offer by a month to November 18 after Canada's competition regulator sought more information.

The sources working on the deal said regulators wanted more details about BHP's plans for its existing Jansen potash project in Saskatchewan and its marketing strategy.

The regulatory process is taking on political overtones, with some opponents rallying behind the issue of a Canpotex breakup.

Potash Corp is one of three members of Canpotex. The cartel accounts for a third of global potash exports and has helped buoy prices for years.

Kloppers, whose company is one of the world's largest miners of iron ore, copper and coal, said dismantling Canpotex was a natural next step toward market-based pricing.

He pointed at other cartels that have undergone similar change and said a breakup would eventually help Saskatchewan as a whole.

"Our experience is, it's better to move with the time rather than to try and hold it back," he told the Globe and Mail editorial board.

"I see early signs in Potash Corp's market ... It would very much surprise me if in the long run it doesn't follow the same path."

Saskatchewan Premier Brad Wall on Monday repeated his concerns that a BHP takeover of Potash Corp would hurt his province because a breakup of Canpotex would cut government revenue derived from potash sales.

Kloppers is due to meet Canada's leading opposition parties in Ottawa on Wednesday, but he will not meet with Prime Minister Stephen Harper.

BHP has hired three former advisers to Canadian prime ministers, including one who worked for Stephen Harper, the current prime minister, as it seeks to build political support.

The three lobbyists -- Michael Coates, William Pristanski and Bruce Hartley -- have registered with the government as required by law.

In another sign of Chinese interest in getting involved, the Financial Times reported that Sinochem, the state-owned chemical group, has hired Deutsche Bank and Citigroup to evaluate a possible move to foil BHP's bid.

A Chinese bank, thought to be Industrial and Commercial Bank of China, was also part of the team, people familiar the matter said, according to the report.

(Additional reporting by Cameron French; Editing by Frank McGurty)

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