August 20, 2010 / 4:04 PM / in 7 years

REUTERS POLL-Potash investors eye 25 pct lift to BHP bid

* Shareholders think deal could be done at $162

* Believe deal is likely to go through

* Think chances of rival bid are slim

* Analysts predict deal at $157 per share

By Cecilia Valente and Eric Onstad

LONDON, Aug 20 (Reuters) - Investors in Canada’s Potash Corp think BHP Billiton could succeed in its bid for the company if it sweetens its $39-billion offer by a quarter, according to a Reuters poll.

Asked at what price a takeover could happen, a sample of 11 global shareholders produced an average answer at $162 per share, against the $130 offer on the table.

Separately, a Reuters poll of 15 analysts in North America and in Europe found that the industry specialists believe a deal could be done at $157.

This week Potash’s board rejected the Australian mining giant’s offer, prompting BHP to approach directly investors in the world’s largest fertiliser producer.

No analysts believed that BHP would be successful with its initial bid.

“I don’t think for one moment that BHP thought that $130 would be the knock-out blow,” said analyst Paul Galloway at Bernstein Research in London. Even though the investors polled were expecting an upgrade on price, they are also pretty confident a deal would get done eventually.

Of the six investors who commented on the probability of a successful takeover, two put it at 70 percent, one at 75 and another said the chances were “medium to high”, while another two reckoned it was 50-50.

The analysts reckoned the takeover had a 72 percent chance of going ahead.

“I would say it would have to get to the $160 to $180 range for there to be a potential for a deal,” said Paul Taylor, chief investment officer at BMO Harris Investment Management, which he said holds more than 400,000 shares in Potash.

WHITE KNIGHT?

Shareholders were not holding out great hopes for a rival bidder that could come to Potash’s rescue with a higher price, even if one thought it “highly likely”.

But there were some who looked to China to throw up a such a white knight, echoing what industry sources have told Reuters.

Asked to put a percentage on the prospects for a rival bid, two respondents from the investor poll went for 25 and 30 percent. For analysts, only three of 15 respondents expected another firm to throw its hat in the ring, with the remainder thinking it impossible or unlikely, or predicting a stake sale to a third party. “Potash is a great company. For BHP it is a great deal too, it has a lot of cash,” said one investor, who believed Rio Tinto as well as Chinese firms could still counter-bid.

“In the long run, people need more grain and beef and that comes from potash,” the shareholder said, on condition of anonymity.

The prospect of a full bid by China for the whole company was dismissed by most analysts, including Peter Davey at Ambrian Capital in London.

“I think the Canadian government would take umbrage at that,” said Davey, regarding a Chinese counter bid. “You have got to bear in mind that it’s like a national champion and all their national champions in the mining world have just been wiped out.”

Reuters polled a range of large, medium and small Potash investors, based in North America, Europe and Asia. Their combined holdings equate to about 4.5 million shares or about 1.5 percent of the company.

Responses from investors on price ranged between $130 and $200 per share. The $130 response was given by a fund manager who has a far larger stake in BHP Billiton than in Potash.

The average figure was achieved by using a mid-point when shareholders gave a price range. (Additional reporting by Claire Milhench, Julie Crust and Laurence Fletcher in London, Euan Rocha, Jennifer Kwan and Pav Jordan in Toronto, Faith Hung in Taipei, Chikafumi Hodo in Tokyo, Samuel Shen in Shanghai, Kevin Lim in Singapore and Donny Kwok in Hong Kong) (Editing by Louise Heavens)

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