Rival bidders may be looking to derail BHP Billiton’s $39 billion bid for Canada’s Potash Corp., with China’s Sinochem and a Canadian pension fund working on plans, according to newspaper reports.

Canada’s Ontario Teachers Pension Plan is talking to Singapore investment fund Temasek about launching an offer for Potash Corp., possibly with Canadian miner Teck Resources, British newspaper The Sunday Times said.

“Everybody is talking to everyone,” said a person familiar with the situation who did not deny that Temasek had been approached.

Temasek declined to comment on the report on Monday.

POLITICAL HURDLES

Roping in NMDC as a possible partner may help Sinochem get over political hurdles in Canada against a Chinese company bidding for Potash Corp., the Economic Times newspaper said, quoting people familiar with the situation.

Sinochem won’t bid for Potash unless the Canadian government gives a positive signal that it would approve a deal led by the state-owned chemicals group, a person familiar with the matter said on Friday.

NMDC Chairman Rana Som denied the company was planning a joint bid with Sinochem for Potash.

“There is no such proposal. In any case this is a very expensive property,” Som told Reuters.

NMDC has recently outlined a plan to invest in the mining project of another Canadian company, Potash One, and in a rock-phosphate venture in Zimbabwe as part of its plan to expand into fertiliser, the Economic Times said.

A spokesman for Sinochem declined to comment on the reports.

HURDLES FOR SINOCHEM

Potash Corp. has rejected BHP’s $130-a-share bid as too cheap, and has said it expects other investors to enter the fray. Potash Corp. shares jumped 3.5 percent on Friday to $145.80, suggesting investors believe a higher offer will emerge.

British papers The Times and The Sunday Telegraph said Potash was considering defensive moves, which could include a break-up of the business to fend off BHP.

Both newspapers said one move Potash could make is to sell its nitrogen and phosphate operations and return up to $70 a share to its shareholders.

The Telegraph said Potash was talking to groups such as OTPP and others, which had received strong support from the Canadian government.

Ontario Teachers Pension Plan and Teck Resources were not available to comment on Sunday, but both have previously said they would not be interested in launching a bid for Potash Corp.

A Potash Corp spokesman in Melbourne declined to comment on the reports.

Investment bankers and lawyers have said it would be very difficult for Sinochem to stitch together a bid without financial backing from Chinese sources and without reassurance from the Canadian government that a bid would be allowed.

“I don’t think our friends in Beijing want to get into a public takeover battle. A negotiated deal is preferred — a friendly negotiated deal is even better,” said an Asia-based investment banker with direct knowledge of the matter.

China is nervous about bidding for Potash Corp. after China Minmetals’ bid was forced to withdraw its bid for Canadian miner Noranda and China National Offshore Oil Corp’s had to drop its bid for U.S.-based Unocal in 2005 after running into anti-Chinese backlashes.

“They recognise there are potentially significant challenges. The chances of this happening are pretty low,” the investment banker said.

Temasek was previously approached by China’s Sinochem to join a bid as it is wary of BHP taking control over 25 percent of the world’s potash supplies, crucial for boosting food production to feed China’s huge population.

Temasek has made no decision on those talks, the person familiar with the situation said.

In India, a newspaper reported on Monday that Sinochem had approached Indian state-run miner NMDC Ltd to join a bid.