Potash's Chinese Suitor Preps Bid: Report

Sinochem, long rumored as the leading candidate to emerge as a legit white knight rival to BHP Billiton for Potash, reportedly asks the government for backing to make a bid.
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(Potash story updated with details about BHP Billiton CEO Marius Kloppers' visit to Saskatchewan.)

NEW YORK (

TheStreet

) -- It sounds official, but who knows:

Sinochem

, the Chinese state-controlled chemical-industrial concern, has petitioned the Chinese government to back a white-knight bid for

Potash

(POT)

that would compete with

BHP Billiton's

(BHP) - Get Report

hostile attempt to

acquire the Saskatchewan salt miner

.

At least that's according to a weekly newspaper based in Beijing

called the Economic Observer

, which cited anonymous sources for its purported scoop,

Reuters

reported on Sunday. This comes just days after Sinochem's last appearance in the Chinese media. That time, a high-level company official apparently told the respected business magazine

Caijing

that Sinochem didn't have any real interest in making a play for Potash. The remarks later disappeared from the magazine's web site.

>>Potash vs. BHP: The Fertilizer War From A to Z

Now, however, according to the

Economic Observer

, Sinochem has told the government that it would need to put up $40 billion to $60 billion in order to legitimately contend with BHP for the Potash prize. It's universally believed that BHP will need to lift its current bid -- $130 a share or $38.6 billion -- if it wants to succeed in its pursuit, regardless of whether it faces any competition.

The English-language version of the

Economic Observer's

Web site summarized the article: "Sinochem has submitted a written request to the relevant central government agencies arguing that as the international potash market is related to national food security, it's requesting government backing of a takeover bid."

The

Observer

also said that Sinochem doesn't have the financial wherewithal to make a bid on its own, "and would need to team up" with another entity. According to the paper, recent scuttlebutt linking Sinochem with the Singapore sovereign wealth fund,

Tamesk

, is real. "Sinochem has been in touch with

Tamesk concerning a potential bid, but no deal has yet been reached."

Meanwhile, on Monday, BHP Billiton CEO Marius Kloppers will be dropping in on

Saskatoon, Saskatchewan

, home to Potash (except the company's own CEO,

Bill Doyle

, that is).

The company line is that Kloppers is in town to "celebrate the official opening of the company's new downtown office," according to the

Leader-Post

, the daily newspaper of the province's capital, Regina. (BHP has for a few years now been developing a potash mine in

Jansen

, not far from Saskatoon and the enormous mines owned by Potash.)

But, of course, Kloppers might have a few things on his plate other than perfunctory ribbon cuttings while traveling through Saskatchewan. The executive will likely meet with those provincial authorities who will hold a crucial role in approving any deal that BHP might strike with Potash.

So far, those authorities have voiced a slew of concerns, including BHP's stated desire to split from the export cartel called Canpotex that has been a pillar of the potash industry for decades. BHP has since backed away somewhat from that threat, but Kloppers clearly has some wooing to do among the leaders in this Great Plains province, which derives half its tax revenue from the potash industry.

Also Monday, BHP shored up the financing for its proposed takeover, inking a deal with five underwriters to syndicate a $45 billion acquisition loan, preliminary agreements for which were already in place.

The tender offer BHP has extended for Potash shares is set to expire on Oct. 19.

Last week, Canada's

Globe & Mail

newspaper reported that Potash has been scrambling to cobble together a confederation of interests that would pool funds in order to take Potash private in a leveraged buyout. Sinochem was named as one of the possible members of that bidding group, along with sovereign wealth funds, Canadian pension funds and even Potash rival

Mosaic

(MOS) - Get Report

.

Potash shares were trading Monday at $150.02, up about 2% for the session, having tread water since BHP's bid for Potash first came to light on Aug. 17.

-- Written by Scott Eden in New York

RELATED STORIES:

>>Potash vs. BHP: The Fertilizer War From A to Z

>>BHP Buy of Potash a Bad Idea, Says Analyst

>>Potash Talks Rebound, Pricing but Not BHP

>>Potash Trying China Led Buyout

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