* Regulatory approvals top focus - source
* Market pricing in higher bid for Potash Corp
* BHP preparing to file for regulatory approval on loan
* BHP shares dip 0.7 pct, extending Wednesday losses
By Michael Smith
SYDNEY, Aug 19 BHP Billiton is focusing on
getting regulatory approval for its $39 billion hostile bid for
Potash Corp before trying in earnest to win over the Canadian
company's shareholders, a source said on Thursday.
BHP, the world's largest miner, is betting the absence of
any rival offers will sway Potash Corp investors to support its
bid, said the source familiar with the situation.
"At that point -- if there has been no higher bid, and they
don't think there will be -- if they have regulatory approvals
and they don't manage to get another bid up, his (Potash chief
Bill Doyle) leverage is reduced," said the source, who was not
authorised to speak publicly and declined to be identified.
"It is early days. This is a bit of a slow motion race."
BHP aims to vault to the top of a rebounding fertiliser
industry, which suffered during the global economic crisis,
through the world's largest takeover offer this year.
The deal would give it 20 percent of the global market for
potash, critical for boosting crop yields as global populations
grow and the amount of arable land available shrinks.
LOAN DEAL APPROVAL SOUGHT
BHP was preparing to file details of its $40 billion loan
to finance the deal with the U.S. Securities and Exchange
Commission as a first step in clearing regulatory hurdles for
its bid, said the source.
BHP declined to comment. After a big splash on Wednesday
when it announced it was taking its bid direct to shareholders,
the BHP camp has gone quiet.
BHP chief executive Marius Kloppers was expected to
spearhead efforts to charm Potash investors into accepting the
bid. It was unclear Thursday whether that process had started
although Kloppers was expected to focus on releasing the
company's full-year results in London next week.
The mood in the BHP camp was relaxed, according to a person
familiar with the situation, with the miner confident it would
be able to convince Potash shareholders to accept despite early
indications many were underwhelmed by the $130-a-share offer.
"Were they being cheeky? Were they being cheap? Were they
being strategic? To tell you the truth, there is an element to
all of that in the offer," according to one investment banker
who was not working on BHP's bid.
Potash argues the bid doesn't take into account its
position as the world's largest and lowest cost producer of the
fertiliser at a time when the market is rebounding.
Potash commanded more than $1,000 a tonne during the
commodity boom of 2007-08, pushing Potash Corp shares above
$241. It has since fallen to about $350 to $375 a tonne levels.
Still, potash demand is expected to climb steadily as
incomes rise in China, India and other emerging economies, and
their population growth accelerates. That will put pressure on
farmers to grow higher quality food and increase crop yields.
"The only thing for certain is that there will be something
like 9.5 billion people in the world by 2050 that will need to
be fed," said Nick Drew, executive director of the Fertilizer
Industry Federation of Australia. That's up from 6.8 billion
people at present.
"There's going to a high degree of intensification of
agriculture and depending on how supply and demand balances up,
the demand for inputs for agriculture is absolutely going to
increase," said Drew.
BHP's Australian-listed shares fell 0.8 percent to A$38.10
on Thursday. The stock fell about 4 percent the previous
session after Potash announced it had rejected the miner's
Potash Corp's New York-listed shares closed at $147.93 on
Wednesday, 17 percent above BHP's bid -- an unusually large
premium to the offer, indicating Potash investors are convinced
an higher offer is coming.
Potash's directors put a poison pill in place to fend off
BHP, while leaving the door open for a higher bid.
Investors were sanguine about BHP's big move into potash,
even if it had to increase its bid to grow big in a soft
commodity with a completely different end market than its
metals, iron ore and petroleum arms.
"They'll have to pay more, but, look, BHP's well cashed
up," said Stephen Bartrop, portfolio manager at Limestreet
Capital, which owns BHP shares.
He said for a company as large as BHP, it was hard to find
major assets with attractive fundamentals that would make a
difference to its portfolio, and Potash Corp fit the bill.
"While you might see some softness around (BHP's) share
price, and clearly hedge funds will play a game, at the end of
the day it's the right type of acquisition that BHP should be
looking at. And they're very few and far between," Bartrop
The offer is conditional on 50 percent shareholder approval
and U.S. and Canadian foreign investment and competition
approvals. The offer opened Thursday and expires on October 19.
Even if BHP raised its offer, which it can do under the
current approach more easily than an Australian-style scheme of
arrangement, it would not change the October 19 deadline, a
While Potash Corp may have time on its side, it could
struggle to find a viable alternative to BHP's bid, given the
huge size of any potential deal, investment bankers said.
BHP rivals such as Brazil's Vale would find it difficult to
match the firepower of BHP's estimated $11 billion cash pile.
However, there was the possibility of consortium deals, one
banker said Thursday.
"The company is in play. The focus is on them and everyone
will be looking," the banker said.
(Additional reporting by Bruce Hextall in Sydney and Sonali
Paul in Melbourne; Editing by Lincoln Feast)