Potash plans break up to avoid BHP bid

POTASHCORP, the Canadian chemicals giant, is believed to be working on a potential break up of the company as one way of fending off a $38.6bn (£24.1bn) hostile bid from the mining company BHP Billiton.

The plan is among several strategies being worked on at Potash – whose advisers include RBC Capital Markets, Goldman Sachs and Bank of America Merrill Lynch – ahead of the deadline for BHP's $130-a-share bid of 18 November.

Another strategy is for a counterbid to emerge from the Ontario Teachers Pension Fund (OTPP), which is believed to have already approached Singapore’s state investment agency Temasek, as part of a search for partners to bid for all or part of PotashCorp.

The OTPP is reported to have opened preliminary talks with Temasek, although discussions are at a very early stage.

Sinochem, the Chinese state-owned chemicals and fertilisers company, is believed to have approached Temasek last week. But Sinochem appears to be struggling to mount an effective counterbid. Its chances have also narrowed since a Canadian government-sponsored report advised of the dangers of Potashcorp falling into the hands of a state-owned Chinese company.

Talks are also thought to have included mining companies and fellow members of the Canpotex cartel – which control the price of potash outside North America. Such attempts are thought to have received strong support from the Canadian Government
But almost two months after BHP first revealed its $130-a-share all-cash bid, a genuine counterbid for the company has yet to emerge.

PotashCorp has rejected the BHP offer as “wholly inadequate.

BHP has also held a series of talks with Potash's closest competitors about major asset disposals. These include fellow Canadian Agrium, Norwegian company Yara, Mosaic – a subsidiary of US food giant Cargill - and little-known Russian players Silvinit and Uralkali, to sell the non-Potash parts of its business. According to sources, this could raise between $40 to $50 per share.