* Sinochem hires HSBC to advise on Potash options - report
* HSBC declines to comment
* BHP investors set top bid at $155/share for Potash - poll
* Potash shares ease to $145.95, 12 percent above offer
* BHP shares up 0.5 pct, in line with UK mining index
(Adds analyst comment)
By Sonali Paul and Joseph Chaney
MELBOURNE/HONG KONG, Sept 2 China is stepping up
attempts to hamper BHP Billiton's (BHP.AX) (BLT.L) $39 billion
hostile offer for Potash Corp (POT.TO), amid worries about
future supplies of fertiliser it needs to rapidly boost food
China's state-run Sinochem has hired HSBC (HSBA.L) to advise
it on options regarding Potash (POT.N), the world's largest
fertiliser maker, the Wall Street Journal reported on Wednesday.
Citing a person familiar with the situation, the WSJ said
the Chinese company's move was preliminary and did not mean it
had decided to make a counterbid for Potash.
Sinochem in Beijing was not available for comment, while
HSBC in Hong Kong declined to comment.
Analysts are sceptical that China, the world's top consumer
of potash, will come to the rescue of Potash Corp after other
foreign deals collapsed.
"Above all the Chinese will not want to be rebuffed in any
way. It was bad enough what happened to them with Rio Tinto so I
would think they would be extremely cautious," said analyst Tom
Gidley-Kitchin at Charles Stanley in London.
Miner Rio Tinto (RIO.L) (RIO.AX) last year scrapped a $19.5
billion equity and asset tie-up with Chinese state-owned
aluminium group Chinalco.
"The loss of face after all the problems they have had would
be bad for the country and bad for the person who signs off on
it. This is so high profile," Gidley-Kitchin said.
Potash Corp has held discussions with Sinochem, a source
close to the matter told Reuters in August. Potash has a 22
percent stake in top Chinese fertilser company Sinofert
(0297.HK), a subsidiary of Sinochem.
Sinochem's options may be limited due to Canadian government
worries. The energy minister of Saskatchewan, Potash's home
base, said the province would have "lots of concerns" about a
Chinese sovereign fund or state-owned company buying part or all
of the company. [ID:nN31264758]
"That is where some of the concern would be: having a
customer whose interests obviously are to have very low prices,"
energy minister Bill Boyd told Reuters in an interview this
On Wednesday, a Chinese newspaper reported China was also
considering launching an anti-monopoly investigation into the
China buys about 7 percent of the output of Potash Corp,
which controls around one-fifth of world production of the key
More on the BHP bid [ID:nN22340110]
Potash reserves/producers link.reuters.com/sum65n
Breakingviews on Sinochem [ID:nLDE6810T3]
Investor poll on BHP's bid price [ID:nLDE6801RS]
Insider on Sinochem link.reuters.com/pad98n
StarMine comparative data: r.reuters.com/meh36n
Deal calculator graphic r.reuters.com/man27n
QUESTION OF PRICE
If HSBC has snared a mandate with Sinochem, that would be
significant as HSBC did not rank within the top 25 mergers and
acquisitions advisers worldwide in 2009, while Morgan Stanley
(MS.N) was No.1, according to Thomson Reuters data.
Bankers not advising BHP or Potash Corp, such as Morgan
Stanley and Australia's Macquarie Group (MQG.AX), are scrambling
to find potential bidders to enter the fray, bankers have said.
Rio Tinto (RIO.AX), Brazil's Vale (VALE5.SA) and Canada's
Teck Resources TCKb.TO are all seen as unlikely to get into a
bidding war against BHP as they have other priorities or don't
have the balance sheet strength.
Potash Corp (POT.N) shares slipped 0.9 percent on Wednesday
to $145.95, while the U.S. market rose, reflecting creeping
doubts about the chances of a rival bid emerging.
But the stock was still 12 percent above BHP's offer of $130
a share, with investors holding out for a higher offer.
BHP shares in London rose 0.5 percent to 1,916.5 pence by
1212 GMT, in line with the British mining index .FTNMX1770.
BHP shareholders on average see $155 a share, or $46
billion, as the maximum BHP should pay for Potash Corp,
according to a Reuters poll, while Potash shareholders see $162
a share clinching a deal, according to a separate Reuters poll.
BHP investors do not need to approve the $38.6 billion bid.
However under British listing rules, they would have to vote on
a deal if the offer is raised to 25 percent of BHP's total
Based on BHP's market value on Thursday, the offer would
have to be hiked to at least $45.3 billion to trigger a vote of
its own shareholders.
"Even uncontested, they will pay too much," said a
Melbourne-based fund manager whose fund owns BHP shares. "Once
it gets into the $160s, you will get a fairly negative
(Additional reporting by Megan Davies in NEW YORK, Alison Leung
in HONG KONG and Eric Onstad in LONDON; Editing by Ed Davies,
Lincoln Feast and Erica Billingham)