Pension funds may enter Potash battle

Canadian pension funds are reportedly teaming up to thwart BHP Billiton’s US$38.6-billion hostile bid for PotashCorp, but observers say the odds of the move panning out are slim.

CALGARY — Canadian pension funds are reportedly teaming up to thwart BHP Billiton’s US$38.6-billion hostile bid for PotashCorp, but observers say the odds of the move panning out are slim.

The Globe and Mail reported Monday that Alberta Investment Management Corp., or Aimco, is leading talks with other funds to take a 30 per cent “blocking stake” in the Saskatchewan-based fertilizer powerhouse (TSX:POT).

Unnamed sources quoted in the newspaper gave the plan a low chance of success, given the hefty financial commitment involved. As well, BHP’s US$130 per share offer expires Nov. 18, giving the funds only a month to put together a rival bid.

“Do I think the pension funds can pull this off in this time frame? No. Mainly because they are out of their element,” said Marin Katusa, a market strategist with Casey Research.

BHP, a global mining giant, knows the business inside and out, whereas “no money manager wants to be involved in the operation of a mine,” he said.

But even if the Aimco-led plan doesn’t come to fruition, it still may buy PotashCorp some time to find a better offer or pressure BHP to sweeten the pot, Katusa added.

“If anything, the Canadian pension funds are a white knight trying to seduce BHP to up the ante.”

The purpose of the Canadian pension stake would be to make Chinese investment in PotashCorp. more politically palatable, the Globe report said.

China wants to secure supplies of the key crop nutrient, and would get the entire output of one of PotashCorp.’s mines under the arrangement, it said.

The Chinese are likely working both sides of the equation, trying to eke out favourable offtake agreements with either PotashCorp or BHP, Katusa said.

“The Chinese are playing this beautifully. Either way, they get what they want at a reduced, secured price for the long term,” he said.

Aimco CEO Leo de Bever was not immediately available for comment on the report, but has in the past seemed lukewarm to the idea of wading into the takeover battle.

Last month, de Bever confirmed Aimco had been approached through intermediaries to join a potential Chinese-led consortium, but said at the time he couldn’t justify getting involved.

Aimco’s motives must always be economic, not political or nationalistic, de Bever stressed in a September meeting with reporters. He did, however, concede that “nothing is ever dead.”

The Canadian Pension Plan Investment Board, Ontario Teachers Pension Plan and Ontario Municipal Employees Retirement System all declined to comment Monday.

Potash shares were down $1.25 at C$145.53 Monday afternoon on the Toronto Stock exchange.

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