BHP Billiton is focusing on getting regulatory approval for its $39 billion hostile bid for Potash before trying in earnest to win over the Canadian company's shareholders, a source said today.
BHP, the world's largest miner, is betting the absence of any rival offers will sway Potash investors to support its bid, said the source familiar with the situation.
"At that point - if there has been no higher bid, and they don't think there will be - if they have regulatory approvals and they don't manage to get another bid up, his (Potash chief Bill Doyle) leverage is reduced," said the source, who was not authorised to speak publicly and declined to be identified.
"It is early days. This is a bit of a slow motion race."
BHP aims to vault to the top of a rebounding fertiliser industry, which suffered during the global economic crisis, through the world's largest takeover offer this year.
The deal would give it 20 per cent of the global market for potash, critical for boosting crop yields as global populations grow and the amount of arable land available shrinks.
BHP was preparing to file details of its $40 billion loan to finance the deal with the US Securities and Exchange Commission as a first step in clearing regulatory hurdles for its bid, said the source.
BHP declined to comment. After a big splash yesterday when it announced it was taking its bid direct to shareholders, the BHP camp has gone quiet.
BHP chief executive Marius Kloppers was expected to spearhead efforts to charm Potash investors into accepting the bid. It was unclear today whether that process had started although Kloppers was expected to focus on releasing the company's full-year results in London next week.
The mood in the BHP camp was relaxed, according to a person familiar with the situation, with the miner confident it would be able to convince Potash shareholders to accept despite early indications many were underwhelmed by the $130-a-share offer.
Potash argues the bid doesn't take into account its position as the world's largest and lowest cost producer of the fertiliser at a time when the market is rebounding. Potash commanded more than $1,000 a tonne during the commodity boom of 2007-08, pushing Potash Corp shares above $241. It has since fallen to about $350 to $375 a tonne levels.
Still, potash demand is expected to climb steadily as incomes rise in China, India and other emerging economies, and their population growth accelerates. That will put pressure on farmers to grow higher quality food and increase crop yields.
The offer is conditional on 50 per cent shareholder approval and US and Canadian foreign investment and competition approvals. The offer opened today and expires on October 19th.
Even if BHP raised its offer, which it can do under the current approach more easily than an Australian-style scheme of arrangement, it would not change the October 19th deadline, a source said.
Reuters