* Canada competition bureau may rule as early as Sept. 20
* BHP's potential potash mines unlikely to pose obstacle
* Investment Canada key to regulatory approvals timeline
By Pav Jordan and Sonali Paul
TORONTO/MELBOURNE, Sept 17 (Reuters) - BHP Billiton (BHP.AX) might clear the first regulatory hurdles next week for its $39 billion takeover of No. 1 fertilizer producer Potash Corp, but there are other barriers ahead.
Canada's competition watchdog could rule as early as Monday on whether it objects to BHP's hostile bid for Potash (POT.TO) on competition grounds, with a ruling from the U.S. Federal Trade Commission likely next week or soon after.
But that's only the start of something that's bound to be a long process -- regulatory reviews are likely to take at least another two months as Potash Corp's home province of Saskatchewan and Investment Canada also probe the issues.
"Based on the available public information, I don't think there are that many substantive issues from a Competition Act perspective, which should be pretty straightforward for them," said an anti-trust lawyer at a major Canadian corporate law firm. BHP has no potash production of its own, and any mines it may develop are years from opening.
In Canada, the bid faces review under the Canada Competition Act and under the Investment Canada Act.
For more on BHP's Potash bid [ID:nN22340110]
The lawyer said the Investment Canada review will be key, because BHP must prove that its offer is of net benefit to Canada and, perhaps, that there is no risk to national security. Analysts expect that review to take 75 days from the the Aug. 20 launch of the BHP bid, although it could be as short as 45 days, or as long as 105 days.
"The argument against on the basis of national security is a bit more of a stretch, because you are arguing that security of food supply will in turn depend on security of supply of fertilizer," said the anti-trust lawyer. "It's a couple of steps removed. We are not dealing with traditional areas of national security, such as defense and sovereignty."
If BHP pulls out of Canpotex, which it has said it might do in the long term, that should improve competition, so the regulators would be unlikely to oppose that.
However the future of Canpotex and BHP's marketing intentions could be a thorny issue for the Saskatchewan government, which would balk at any move that might lower potash prices and in turn depress its own royalty revenue.
BHP Chief Executive Marius Kloppers has made clear that the takeover process is likely to continue at least to the end of this year, which means it will have to extend its current bid deadline of October 19.
"We'd like to...clear the preconditions so that we've got a bid that is capable of being accepted. And that's what you should look forward to as we proceed through the remainder of this calendar year," Kloppers told analysts at the group's results presentation last month.
The company is not expecting problems.
"BHP Billiton is confident that it will obtain the necessary regulatory approvals for its acquisition of Potash Corp," it said on Sept. 7 ahead of refiling its offer notice to the U.S. Federal Trade Commission.
But an extended timeline would be a double-edged sword for BHP Billiton.
The longer the regulatory reviews take, the more time Potash Corp has to try to find a white knight, with talk that it is trying to put together a management buyout with backing from China, pension funds, sovereign wealth funds and possibly Mosaic. [ID:nSGE68F0KD]
If a counterbid fails to emerge in that time, BHP will be under less pressure to hike its offer much to win over Potash Corp shareholders.
"The more it's strung out, the better it probably is for BHP," said Peter Chilton, an analyst at Constellation Capital Management, which owns BHP shares.
"If other bidders don't come in over that time, it makes it easier for BHP to negotiate."
Potash Corp shares were at $147.97, or around 14 percent above BHP's offer price of $130 a share, reflecting bets that BHP will pay more or another bidder will trump BHP. (Editing by Janet Guttsman)