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Potash Corp. May Not Seek Chinese Rescue From BHP, Beijing Orient Says

Potash Corp. of Saskatchewan Inc., the world’s largest fertilizer producer, probably doesn’t want China to win control in a takeover war with BHP Billiton Ltd., an analyst at Beijing Orient Agribusiness Consultant Co. said.

“China’s potash demand will be more substantial in the long run than that of Brazil’s or India’s,” Xu Hongzhi, a Beijing-based analyst, said by phone. “Who would want their biggest customer potentially to take control and tell them what to do with their product sales prices?”

BHP Billiton, the world’s biggest mining company, this week made a hostile $40 billion offer for Potash Corp. after the Canadian company rejected an approach as “grossly inadequate.” China may bid for Potash Corp. because it’s dependant on imports from the company, Ian Henderson, manager of $7 billion in resource assets at JPMorgan Chase & Co., said yesterday.

“A number of Chinese companies might be able to afford to buy Potash Corp.,” said Xu. “The question is whether the company or the Canadian government will allow their strategic resource to be controlled by the Chinese.”

Rival bidders for Potash Corp. may include Vale, Rio Tinto Group and groups in Russia and China, the world’s biggest user of fertilizer with about 30 percent of global consumption, according to Macquarie Group Ltd.

Possible Bidders

Potash Corp. owns 22 percent of Sinofert Holdings Ltd., a listed unit of Sinochem Corp., the nation’s biggest chemicals trader. In the absence of a higher bid from BHP, Potash Corp. sees its best alternative offers coming from companies including Sinochem Corp. and Sinofert Holdings, two people familiar with the matter said this week.

“I don’t quite believe the speculation that Potash Corp. is seeking Chinese help,” said Xu. “It might be a smoke screen to entice higher bids.”

State-owned Chinese companies may not be able to act fast enough to bid because an investment of that size would need approval from the country’s cabinet and premier, he said.

China is the second-biggest importer of the crop nutrient, after India. Chinese demand for potash may grow 5 percent to 6 percent annually in the next decade, Xu said. The country buys almost half of its potash need.

Potash fertilizer usage in China dropped to about 7.25 million metric tons of potassium chloride equivalent in 2009, from 12 million tons in 2007, Gavin Ju, a consultant at research company CRU, said in January.

Potash Corp. Chief Executive Officer Bill Doyle said demand from China this year was depressed because of weather conditions and that consumption will return to historical levels by 2011.

--Feiwen Rong and Helen Yuan. Editors: Tan Hwee Ann, Indranil Ghosh.

To contact the Bloomberg News staff on this story: Helen Yuan in Shanghai at hyuan@bloomberg.net Feiwen Rong in Beijing at frong2@bloomberg.net

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