BHP and Sinochem bid for Canada’s Potash Corp

September 2nd, 2010 - this article is free to republish with open public license

Potash Corp is a hot commodity in Canada, several interests are competing for the chance to take it over. Potash is slang for potassium carbonate, a primary ingredient in fertilizer, which happens to be the company’s main product. Maybe someone wants to plant a huge garden?

Sinochem a state owned chemical company in China, has been one of the primary bidders. A successful acquisition could expose the Canadian manufacturer to broader markets, and possible a larger consumer base than previously. Canada had some regulatory concerns however, that China’ government would market the products freely instead of negotiating though the export consortium Canpotex.

BHP is the largest mining company in the world and the biggest corporation in Australia.

Reuters - Chinese and other investors have approached at least one big Canadian pension manager about a bid for Canada’s Potash Corp to rival BHP Billiton’s $39 billion hostile offer.

The disclosure by Alberta Investment Management Corp, which manages some C$70 billion ($67 billion) in public sector pension funds, is one of the first pieces of hard evidence to back up speculation that China is looking for a way to derail a takeover of Potash Corp by the powerful Anglo-Australian miner.

China’s state-owned chemicals giant Sinochem has reportedly hired HSBC to evaluate options, and chatter persists that sovereign wealth funds, such as China’s $300 billion China Investment Corp, may also be seeking a bid of some kind.

Given the size of the deal, all major investment banks not working with BHP or Potash Corp are pitching possibilities to Chinese clients, multiple investment banking sources in Asia have told Reuters.

But so far, no formal counter bid has emerged, only talk. The hefty price tag is still prohibitive for many potential suitors, bankers say.

Shares in Potash closed up 1. 8 percent at $148. 55 on Thursday, 14 percent above BHP’s $130 offer price, while BHP shares edged up 0. 3 percent on Friday.

CANADIAN CONCERNS

“Eventually it is an interesting line to draw between an independent company important to a province, and allowing it to go to either a customer with a different set of objectives or let it go to a bigger independent company. It will test a few nerves,” Barker said.

Saskatchewan Energy Minister Bill Boyd has raised concerns about China buying into Potash Corp and about BHP’s stated intent to eventually market its potash offshore on its own, rather than through the export consortium Canpotex.

The state said it had asked the Conference Board, a nonprofit research organization, to examine the effect of a takeover, including the conditions Saskatchewan might ask the federal government to impose on a deal and ways to mitigate risks from BHP’s bid and any others that could come forward.

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Date September 2, 2010