Ontario Teachers Pension Plan to Bid for PotashCorp., Threatening Rival Bids

(October 11, 2010) — BHP Billiton’s $39 billion bid for PotashCorp is likely threatened by rival plans, with reported bids by Sinochem of China and the Ontario Teachers Pension Plan (OTTP). PotashCorp. has rejected BHP’s bid as too cheap, and said it expects other investors to enter the bidding scene.

The Canadian pension fund that owns national lottery operator, Camelot, is attempting to impede BHP Billiton’s £24 billion takeover bid for the world’s biggest fertilizer producer. The OTTP has reportedly approached Temasek, Singapore’s state investment agency, as part of a search for consortium partners that could bid for all or part of PotashCorp. The offer for the Canadian fertilizer producer will be possibly with Canadian miner Teck Resources, the British newspaper The Sunday Times said. Under the plan, PotashCorp. would sell its nitrogen and phosphorous assets, pay out a $70 a share dividend, and increase its debt pile, the newspaper reported without citing its sources. The OTTP, Temasak and Teck are considering both a full-on takeover bid as well as buying a minority stake in Potash meant to halt BHP Billiton’s pursuit.

Separately, Sinochem, the Chinese state-owned chemicals and fertilizers company, has reportedly approached Temasek as well after they approached the Indian state-owned iron ore miner, NMDC, about making a joint bid. Yet, Sinochem has appeared to be struggling to build an effective counterbid, The Financial Times reported. NMDC’s chair quickly denied this, telling Reuters that “there is no such proposal.”

In an interview with The Globe and Mail last week, PotashCorp. chief executive officer Bill Doyle said in an interview that another bid is coming, and the company is talking to a wide-range of potential bidders, citing sovereign funds, private equity and Canadian pension funds as possibilities. He requested more time to let the bid process pan out, indicating that his backup plan will not be revealed until closer to BHP’s bid expiration deadline of November 18.

The activity around PotashCorp of Canada, which sits on roughly 40% of the world’s supply and is by far the most politically stable supplier, illustrates that the fertilizer industry is ripe for takeovers as a new frontier of investing, contributing to a race by pension funds to get their hands on the supply.