* Chinese company or investment fund could back bid - paper
* U.S. rival Mosaic could be involved - paper
* BHP shares fall 0.5 pct in London
(Adds bankers' comments)
By Eric Onstad and Pav Jordan
LONDON/TORONTO, Sept 16 A Chinese-led
consortium with touches of Canadiana is being mobilized to buy
Potash Corp, a newspaper said on Thursday, presenting what
bankers see as the most likely scenario yet for a rival bid for
one of the last great jewels in Canadian resources.
Canada's Globe and Mail newspaper said Potash Corp
(POT.TO), which is fighting off a $39 billion bid from BHP
Billiton's (BHP.AX), is trying to stitch together a consortium
that would also include sovereign wealth funds and perhaps
Canadian pension funds in a management buyout.
Potash Corp has been looking for a white knight since BHP
launched its bid a month ago, and Chinese worries about BHP
getting control over the market for a key crop nutrient have
spawned talk that China would try to block BHP.
The BHP bid would be the largest takeover of the year to
date and would give BHP a significant role in determining the
price of potash, which is used in fertilizer.
The Globe and Mail cited unnamed sources as saying that the
rival bid would include a big element of capital from a Chinese
resource company or investment fund, with smaller contributions
from other investors.
"That doesn't seem outrageous to me," said a banker who is
not involved in the deal.
"If China is smart, and I think they are, since they can't
buy 100 percent, they get into something that looks and feels
like Canadian, with Chinese backing to get something done. It's
not too far off."
A source close to the matter was cautious, but said the
scenario was not inconceivable.
"There are a relatively limited number of possibilities
available in a situation like this," said the source.
Canadian farm minister Gerry Ritz said a Chinese-led LBO
would face the same regulatory scrutiny as any other offer.
Institutions like the Canada Pension Plan Investment Board,
with C$130 billion in assets under management, and Ontario
Teachers' Pension Plan, have for years been active investors
abroad, working with sovereign wealth funds or investing on
their own in assets from Europe to South America to Asia.
The funds have not commented on the Potash deal.
The Globe also said rival potash producer Mosaic Co (MOS.N)
could be part of the consortium.
"It is a viable option," the source told the Globe, noting
that added that it was tough to put together a structure for
the consortium and that other options were still possible.
"It is still a big check to write ... and it is a challenge
to manage multiple parties," the source said.
A Potash Corp spokesman in Melbourne declined to comment on
Analyst Tom Gidley-Kitchin at Charles Stanley in London
said such a consortium would be unwieldy since China, the
world's top potash consumer, would want to keep a lid on potash
prices while other investors would want maximum profits.
"Everyone else who might come into a consortium like that
if they weren't Chinese would be certainly interested in
maximizing returns and doing everything that BHP would be
doing," he said.
"I do think that local regulators (in Canada) would
certainly be asking themselves why the Chinese were getting
involved here. China would be taking quite a risk in getting
involved in something like this is there was a significant
possibility that regulators would stop it."
Canadian bankers said there was little evidence of the
scenario playing out right now, and suggested it might have
been floated to gauge market reaction.
"It was very unexpected to read about it in the press, but
it's not an unexpected thought process," said a banker.
The deadline for BHP's offer is Oct. 19, but the company
needs clearance from regulators before it goes ahead.
Potash Corp shares in New York were at $148.40 per share
near midday on Thursday, 14 percent higher than BHP's cash
offer of $130 per share.
BHP shares fell 1 percent to 1962 pence in London.
(Additional reporting by Sonali Paul and Euan Rocha)