BHP Billiton has the biggest financial muscles of likely suitors for PotashCorp, but that doesn't mean its $39bn offer might not be beaten by a rival with a more optimistic view of fertilizer prices.

Either Rio Tinto, the London-listed mining giant, or Brazil's Vale looked in theory capable of trumping BHP Billiton's $130-a-share offer for PotashCorp without overstretching, National Bank Financial analysts said.

Both Rio Tinto and Vale could offer $146-156 a share in cash, and emerge with "manageable" debt ratios, in the region of 1.5-2.1 times earnings before interest, tax, depreciation and amortisation (ebitda).

Xstrata, the mining group of which commodities trading giant Glencore owns more than one-third, would find a deal more difficult, being left with "weaker� interest coverage metrics", the Canada-based broker said.

Key assumption 

The willingness of rivals to trump BHP, which looked the best resourced suitor, may depend on their forecasts for the price of potash, of which PotashCorp is the world's top producer.

"Higher bids could be driven by expectations of rising commodity prices", which would lift potash values and PotashCorp's earnings hopes, National Bank said.

While the broker, and many rivals, have assumed potash prices of $400 a tonne excluding freight next year, offers could rise to $157-168 a share without denting bidders' earnings-per-share prospects if the nutrient sold for $50 a tonne more.

UBS analysts have also highlighted the potential impact of rising potash prices, saying a long-term potash price of $500 would, other things being equal, justify a PotashCorp bid of $169 a share.

Demand rebound

Many observers have speculated that improving prospects for potash prices, heightened by the jump in grain markets, prompted BHP 10 days ago to make its approach.

ICL, the Israel-based fertilizer group, on Tuesday noted "significantly" higher demand for potash in Brazil in the April-to-June period, adding that fertilizer demand in Europe was "gradually returning to normal consumption levels".

In the US, "following the relatively early summer harvest, expectations are for a long autumn fertilizing season", the group said, unveiling a 71% jump to $259.9m in earnings for the quarter.

National Bank also flagged the potential for China, the world's biggest potash importer, to step into the PotashCorp bid battle, either through an outright bid, a strategic stake, or an investment-for-supplies arrangement.