UPDATE 3-Potash Corp appeals to Israel to allow deal for rival

* Israel has rejected Potash approaches in the past

* Analysts: Deal unlikely in near term, if at all

* ICL, Israel Corp shares jump; Potash up slightly

JERUSALEM, Oct 31 (Reuters) - Potash Corp, the world's No. 1 fertilizer maker, is ramping up efforts to buy Israel Chemicals Ltd, appealing directly to Israel's prime minister to back a deal that would rank as the largest foreign takeover of an Israeli company.

Conglomerate Israel Corp, which owns a majority in ICL, said that Potash Chief Executive Bill Doyle has met Israeli Prime Minister Benjamin Netanyahu to push for a deal, while financial daily Calcalist said Netanyahu has instructed his staff and the finance ministry to examine it.

Potash Corp confirmed on Wednesday it has met with Israeli government officials, and Israel Corp said it was aware of the meetings.

``The company confirms it is aware that Canada's Potash is in talks with various government agencies that included a meeting with the prime minister regarding examining the possibility of merging ICL with Potash,'' Israel Corp said in a statement.

Israel Corp officials declined to comment further. The finance ministry said it had not received any formal request.

Potash Corp already has a 13.84 percent stake in ICL, the world's sixth-largest fertilizer producer. It made its initial investment in 1998.

In the past, Israeli regulators have rebuffed Potash's attempts to take over ICL. Similarly, in 2010, the Canadian government blocked Anglo-Australian miner BHP Billiton Ltd from scooping up Potash Corp, saying the deal would not benefit the country.

``We believe it is likely that the Israeli government will come to the same conclusion regarding a takeover of ICL,'' said Sophie Jourdier, an analyst at Liberum Capital, in a note.

``This deal cannot be ruled out. However it is unlikely to happen in the near term,'' said Virginie Boucher-Ferte, an analyst at Deutsche Bank, in a note to clients.

As a foreign buyer, Potash would need approvals from Israel's Government Companies Authority, the prime minister and the Antitrust Authority. ICL has potash and phosphate mining rights on state-owned land.

Rising incomes and populations in the world's top two potash-consuming nations, China and India, are expected to result in steadily increasing use of fertilizer to produce more food.

But some observers forecast a supply glut. Construction of new potash mines is already under way by BHP Billiton and K+S AG in Canada, EuroChem in Russia and Vale SA in Argentina.

Potash Corp, already the world's largest producer of the crop nutrient potash, has long acted as the swing producer within the sector, cutting production when demand is weak to stabilize prices and boosting output when demand and prices are strong.

While the bulk of its output gets pumped into North American and South American markets, a deal to acquire ICL would allow Potash Corp better shipping access to China, India and other Asian economies that are big consumers of potash.

MEETING WITH PRIME MINISTER

Israel Corp owns 52.3 percent of ICL, while about 34 percent of the company, which has a market value of about $15 billion, is traded on the Tel Aviv Stock Exchange, where ICL is the second-largest company.

Potash's market value is around $35 billion.

A year ago, Potash sought to raise its stake in ICL - which also produces a third of the world's bromine - to 25 percent. The government gave initial approval but Potash pulled the request when regulators took too long to respond.

According to Calcalist, Potash now seeks 100 percent of ICL.

Shares of ICL were up 5.2 percent, while Israel Corp's shares were 5.6 percent higher on Wednesday.

Potash Corp shares were up 0.4 percent in New York and 0.8 percent in Toronto around midday.

Doyle said last week that Potash's equity investments are the second-best potash assets after the company's own.

``We own them with the long-term goal of having a majority position in each one. It doesn't happen overnight, but we think they're a very, very valuable part of our company, and it's more than just a monetary thing,'' he told analysts.

ICL is attractive to Potash because it is one of the two large global potash producers that's independent of the world's two big marketing organizations - Canpotex and Belarusian Potash Co, Joel Jackson, an analyst at BMO Capital Markets, said in a note to clients.

Potash last week posted a 22 percent drop in third-quarter profit largely because of stalled contract talks between Canpotex and China and India. The marketing organization is partly owned by Potash Corp.

Boucher-Ferte said it was not clear whether Potash would offer ICL shareholders a premium for their stock. She said Potash would have to give Israel the right to repatriate licence rights if a hostile country or entity took control of Potash.

Analysts believe the deal would benefit Israel Corp, which would swap control of ICL for a 20 percent stake in Potash and turn the company into a more recognised international player.

Based on current market values, raising its stake to 50.1 percent would cost Potash about $4.7 billion, while 100 percent ownership would cost it at least $13.1 billion, Jackson said.

Potash Corp will soon have cash to spend, as it winds down a nine-year, $8-billion expansion plan in 2013. It could also sell down its equity investments in fertilizer companies Arab Potash Co PLC in Jordan, Sinofert Holdings Ltd in China, or SQM in Chile, Jackson said.

With Israel headed for elections in January, discussions will likely be on hold for the time being.