Alberta's pension fund manager has been approached by state-owned wealth funds from China to join a bid for fertilizer giant Potash Corp. of Saskatchewan Inc., but it said Thursday it intends to stay on the sidelines for now.
Alberta Investment Management Corp., or AIMCo, can't justify participating in a bid to rival the $38.6-billion (U.S.) Australian mining giant BHP Billiton Ltd. has offered for the world's largest potash producer.
"We can't, right now, make the economics work," Leo de Bever, AIMCo's chief executive officer, said at a news conference.
"It's very hard for pension funds to get involved in any kind of motive other than economic return."
While Mr. de Bever said a move on Potash Corp. is not at the top of AIMCo's "hit parade," he admits "nothing is ever dead" when it comes to such deals. The terms on the table currently are a non-starter, though.
Saskatoon-based Potash Corp. has rejected the BHP bid and has said other potential white-knight bidders have been kicking its tires.
Mr. de Bever told business news channel BNN that AIMCo and others have been approached by brokers looking to connect Chinese partners with Canadian players, with an eye to taking some kind of run at Potash Corp. But Mr. de Bever cautioned that any talks so far are purely speculative and no actual negotiations have taken place.
Chinese state-owned companies have topped the list of potential parties that could launch a rival bid. To a lesser degree, there has been speculation that Anglo-Australian Rio Tinto PLC or Brazil's Vale SA could enter the fray.
Generally in these situations, a foreign bidder may seek "local cover" from pension funds to make the bid more "palatable," said Mr. de Bever.
For instance, a Chinese firm may line up financing from AIMCo, or other fund managers like Canada Pension Plan Investment Board or Ontario Teachers' Pension Plan to help smooth the way.
Mr. de Bever said the idea of getting involved in Potash Corp. for political reasons makes him uncomfortable.
"If I were to do that, I would be getting involved in a very dangerous game, where I mix economics and politics. That's not my place," he said.
"From an economic standpoint, getting into a bidding war with BHP is probably not the best way to deploy our capital."
Ultimately the federal and Saskatchewan governments would have a regulatory say on any sale of Potash Corp., a powerhouse in the Prairie province.
Mr. de Bever said there has not been political pressure to join a rival bid per se, but there has been "musing" from some "armchair" observers that a Canadian investor ought to get involved.
For now, he said, AIMCo is much more focused on investing in firms with strong underlying businesses that may have run into financing trouble during the recession. It also wants to explore investments in infrastructure, and ways to capitalize on growth in Asia and South America.
AIMCo is one of Canada's biggest institutional investment fund managers. It handles $71-billion in assets on behalf of Alberta public sector clients.