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WRAPUP 3-Russia rival emerges for Potash, BHP decision looms
November 3, 2010 / 8:22 AM / 7 years ago

WRAPUP 3-Russia rival emerges for Potash, BHP decision looms

* Phosagro calls for Russia joint bid for Potash stake

* Says BHP bid would damage interests of Russian groups

* Says Russia Deputy PM has made moves to examine idea

* Decision by Canada on BHP’s bid due on Wednesday - source

* Analysts say successful Russian bid seems unlikely

(Releads, adds Phosagro Chairman comment, detail)

By Polina Devitt

MOSCOW, Nov 3 (Reuters) - Russian fertiliser group Phosagro wants Russian firms to buy a stake in Potash Corp (POT.TO) in an attempt to scupper BHP Billiton’s (BHP.AX) $39 billion offer awaiting a crucial ruling from the Canadian government.

Phosagro Chairman Vladimir Litvinenko said he had asked close ally and Russian Prime Minister Vladimir Putin to approve a potential move and examine the financial details, saying Russian interests were at stake if BHP was allowed to succeed.

“The potash market is being consolidated and so far we have been only watching ... If BHP controls the potash market, the consequences for our producers may be serious... We can lose part of markets,” he told Reuters in a telephone interview on Wednesday.

He said Russian and Western banks could be involved in the bid both as lenders and investors, but ruled out a full takeover approach for Canada’s Potash Corp (POT.N), the world’s biggest producer of the key fertiliser component.

“We are not talking about a takeover. It can be a merger or a stake purchase,” he added.

His comments will reignite speculation about a possible bidding war in the world’s biggest takeover for 2010 and came on the day Ottawa is due to tell BHP whether it will approve or reject the deal.

Two Canadian newspapers reported on Tuesday that bureaucrats were advising the government to allow BHP’s bid for the world’s largest fertiliser market although rumours swirled in the markets that Ottawa would block it. [ID:nN02206060]

The federal Canadian government will announce its decision after 4:30 pm (2030 GMT) on Wednesday, an official said. [ID:nOLA3ME64E]

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For other BHP-Potash stories [ID:nN22340110]

SCENARIOS ON BHP’s Potash bid [ID:nN02225218]

BHP/Potash timeline r.reuters.com/zew32q

World's top potash producers here ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

STRONG PLAYER

A serious Russia threat will crank up the pressure on BHP Billiton Chief Executive Marius Kloppers, who is having a second crack at a multi-billion dollar hostile deal after the collapse of a takeover bid for Rio Tinto (RIO.L) (RIO.AX) in 2008.

Phosagro is the third biggest Russian potash producer behind Uralkali (URKA.MM) and Silvinit SILV.MM, while Beraluskali, the world’s second biggest player, is a trading partner.

Uralkali and Silvinit are currently being merged by potash tycoon Suleiman Kerimov, prompting speculation that Russia is trying to create a national potash champion. [ID:nLDE66I071]

“Phosagro, Uralkali and Silvinit in alliance with Belaruskali -- (together) we are a very strong player. And we have a chance to either strengthen it or get a serious challenge from BHP,” Litvinenko said.

Troika Dialog said a successful bid would put Russia in control of 65 percent of global potash trade -- a key component of world food supplies, while Credit Suisse analysts added that Potash Corp could have drummed up the Russia bid as a ‘white knight’ defence to the unwelcome BHP offer.

Both expressed doubt the move would succeed.

“From a (Potash) shareholder point of view, you don’t necessarily want to have a blocking stake. You could also say you wouldn’t necessarily want a highly leveraged investor, who in due course might be forced to sell its stake,” analyst Tom Gidley-Kitchin at Charles Stanley in London said.

QUICK RESPONSE

Putin and Litvinenko have been close allies since Putin defended his 1997 PhD thesis at the St Petersburg institute where Litvinenko is rector.

No serious rival bidders for Potash had previously emerged. Potash has said it held talks with 15 strategic, financial and state-sponsored potential bidders and investors but admitted in a tough market, a white knight would need more time to raise financing.

Potash has flatly rejected BHP’s current $130-a-share offer as inadequate and has repeatedly said it expects other offers.

Potash Corp shares ended 1.1 percent lower in New York on Tuesday, while BHP Billiton’s shares closed up 0.8 percent in Sydney on Wednesday.

BHP stock eased in London (BLT.L) after rising the previous session on market talk that Canada would block a takeover of Potash or impose tough conditions that would scupper the bid.

A “yes” from Ottawa will likely prolong the takeover battle and it may well force BHP to raise its bid.

Since BHP announced its bid in late August, the stock has held well above the offer price, as investors bet that a higher bid will eventually emerge.

Canada’s Conservative minority government risks alienating its political allies in Saskatchewan if it allows the bid. But the pro-business government risks sending a damaging anti-market message to the global investment community if it blocks the takeover. (Additional reporting by Sonali Paul in Melbourne and Maria Kiselyova in Moscow; Writing by John Bowker and Michael Smith; additional reporting by Eric Onstad: Editing by Michael Shields and Hans Peters)

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