CORRECTED - SCENARIOS-What could happen to Potash Corp?

(Corrects to show Saskatoon is not provincial capital) (In U.S. dollars)

By Pav Jordan

TORONTO Oct 28 (Reuters) - As the Nov. 3 deadline nears for Canada to decide on whether to block BHP Billiton's (BLT.L) bid for Potash Corp (POT.TO), political rhetoric and speculation surrounding the $39 billion takeover battle has intensified.

Shares of Potash Corp fell 2.8 percent in New York early Thursday afternoon on a report in the Globe and Mail newspaper that raised fresh concerns that the federal government was leaning toward blocking the hostile bid by the Anglo-Australian miner.

BHP dismissed the report as inaccurate and said it had confidence in Ottawa's review process.

Also on Thursday, Saskatchewan Premier Brad Wall said he was more optimistic of Ottawa blocking the bid after Alberta's premier also voiced his opposition to the bid.

Canadian newspapers reported that aboriginal First Nations group in Saskatchewan were seeking to put together a rival bid, talking to banks, pension funds and Chinese investors.

A fortnight ago it emerged that China's Sinochem had ruled out a counterbid for Potash Corp, removing one of the most prominent candidates to challenge BHP's offer.

Here are some of the scenarios that might unfold in the takeover battle, which came to light in late August.

HOSTILE SHOWDOWN

Probability: Most likely

With Sinochem out of the picture, a showdown is the most likely scenario because the Chinese chemical group's withdrawal makes it more difficult for Potash to convince shareholders other bidders will surface.

In September, Potash shareholders indicated they would need BHP to raise its $130-per-share bid to $162 before accepting an offer, according to a Reuters poll. [ID:nLDE67J0PV]

If BHP sweetens its bid but still can't win over Potash's board, the Anglo-Australian miner may again take the higher offer directly to shareholders.

NEGOTIATED DEAL

Probability: Likely

This outcome is only possible if BHP is willing to substantially raise its bid for Potash.

Some analysts argue that a negotiated deal would take an offer of at least $150 a share, while others say Potash's net asset value alone is $160 to $170 a share.

Potash shares touched a high of $240 in 2008.

Some analysts say a deal above $165 a share would hurt BHP's earnings, but an offer is unlikely to reach that level.

BHP faces the additional obstacle of needing formal approval by its own shareholders if the bid, including any assumed debt, exceeds 25 percent of BHP's own market value. As of Thursday, that would make any bid over $54 billion subject to a BHP shareholder vote.

POTASH FORMS JOINT VENTURE

Probability: Possible

Potash could foil BHP by selling a portion of its assets into a joint venture at a price that implies a much higher value for the whole company than BHP's current bid.

Sinochem, China's top fertilizer maker, would make a viable joint-venture partner, especially since it abandoned any plans for a counterbid for the whole company.

A Chinese company would probably seek a supply agreement deal with Potash as part of any agreement to form joint venture. That would have to be structured around Canpotex -- the international marketing arm of Potash Corp, Mosaic Co (MOS.N) and Agrium Inc (AGU.TO).

BHP has said it may eventually exit the consortium if it takes over Potash. Saskatchewan sees the marketing organization as crucial for maintaining its royalty revenues.

REGULATORS BLOCK BID

Probability : Possible

Canadian regulators rule that a takeover by BHP is not a "net benefit" to Canada and the province of Saskatchewan, forcing the miner to walk away.

Alternatively, regulators could ask for commitments from BHP that are so onerous that a deal becomes unattractive.

Potash Corp has already offered to relocate several key executives from Chicago to Saskatoon, Saskatchewan. That removes one of the advantages offered under BHP's proposal and weakens BHP's case under a "net benefit" test.

The deal could also be squashed on national security grounds, but lawyers say that is unlikely because it would require the government to prove security of food supply depends on security of fertilizer supplies.

BHP WALKS AWAY

Probability: Possible

BHP has a history of being disciplined on takeover bids. It could walk away, just as it did with an attempted takeover of Rio Tinto (RIO.L).

Alternatively, it could raise its bid but fail to win over Potash shareholders, forcing it to back out.

Chief Executive Marius Kloppers will want to avoid a replay of Rio Tinto's 2007 takeover of Canadian aluminum company Alcan, in which Rio got caught up in a bidding war at the height of the commodities boom.

OTHER WHITE KNIGHTS

Probability: Unlikely

Analysts and investment bankers say that of the other global miners, only Rio Tinto and Brazil's Vale (VALE5.SA) are big enough to consider bids on their own.

Vale has said it is not planning a bid for the company. It already has some potash assets, and is under heavy political pressure to invest in Brazil. [ID:nN23192967]

Rio Tinto is also viewed as a long-shot bidder. It recently sold potash assets and is still recovering from its ill-timed $38 billion takeover of Alcan.

Top Canadian pension funds have been approached by the Chinese to explore a joint bid but declined because of the size of Potash's assets and the cyclical nature of commodities. Neither of those factors fits their long-term, conservative investment strategies.

(Editing by Frank McGurty)