Analyst touts Shell, oil majors as rival bidders for PotashCorp

21 October 2010 19:48  [Source: ICIS news]

TORONTO (ICIS)--Oil majors such as Shell and Chevron should mount a rival bid for Canada’s PotashCorp to edge out BHP Billiton’s $40bn (€29bn) bid, a Canadian analyst said on Thursday.

“A big oil company with a big enough pocket is the only one to do a deal like this” apart from BHP, said Chris Damas, principal at equity research BCMI Research in a briefing on Canadian business television.

Oil exploration and production is not all that different from potash mining, he said. In fact, there were a lot of direct links, given that sulphur from oil and gas production is used to make key phosphate fertilizers.

Also, the potash business “comes with a little cartel, kind of like OPEC”, but with fewer members and better compliance, and the potash business is a lot less risky than deep-sea exploration, Damas said. 

“You can buy the whole company, it’s in play, and [oil] is just as essential for human life as energy,” he said.

Some 20 or 30 years down the road, an investment in potash would turn out to be a very profitable for an oil major, he said.

Damas, joining other analysts and commentators, also said that Canada’s federal government is not likely to block BHP Billiton’s bid for PotashCorp, even if the Saskatchewan provincial government – in announcement on Thursday – should object, as is widely expected.

Commentators said that Prime Minister Stephen Harper, who prided himself on making “pro-business” decisions, would be worried about the impact of a negative decision on foreign investors.

In a related development, news media reports quoted BHP Billiton chairman Jacques Nasser as telling investors earlier on Thursday that his company would not be caught in a bidding war for PotashCorp – an indication that BHP may not raise its $130/share bid from August.

($1 = €0.72)

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By: Stefan Baumgarten
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