COMPETITION & ANTITRUST LAW » Developments

China Tells State Companies to Explore Potash Bid

admin — Sun, 05 Sep 2010 22:59:36 +0000

According to Reuters, Chinese state officials have ordered state companies to meet with investment bankers to explore options to potentially block BHP’s $39 billion hostile bid for Potash Corp. Late last week Reuters reported:

“In response to the directive, Sinochem is holding meetings with several banks, the source said on Friday, including Citigroup, HSBC and Morgan Stanley.

The order from Beijing underscores the seriousness with which China is taking the potential BHP-Potash tie up and its implications for the pricing and supply of the crop nutrient, despite obstacles to launching a successful counter-bid.

‘They are being instructed,’ the source said, adding the order was issued late last week. ‘The chairman of Sinochem has been asked to speak to other banks.’

A Wall Street Journal report on Thursday said Sinochem had hired HSBC to advise on options pertaining to Potash Corp.

One option being discussed is the possibility of Sinochem linking with China’s $300 billion sovereign wealth fund CIC, according to a second banking source familiar with the matter.

The most likely scenario is that China will consider buying a blocking stake, rather than attempt a complete takeover of Potash Corp, said both sources who were not authorized to speak publicly due to the sensitive nature of the discussions.

Assuming a consortium pays a 20 percent premium to Potash’s market price, a 15 percent stake would cost about $8.3 billion.”

Options for Chinese firms include launching a competing hostile bid for Potash Corp., acquiring a blocking stake in Potash Corp. or using Canada’s foreign investment rules to oppose the transaction. Such grounds may include arguments that the investment would not be of “net benefit” to Canada or, likely more remotely, that the investment threatens Canada’s national security (though it is difficult to see how potash could have any national security implications).

It seems rather doubtful, however, that strategies not involving competing acquisitions would be successful, particularly given BHP’s apparent willingness to provide satisfactory commitments (i.e., undertakings) in connection with the transaction and the difficulty of seeing how control of potash could be key to Canada’s national security. It seems even less likely, despite the recent Government proceedings against U.S. Steel (for allegedly failing to comply with its undertaking in connection with its acquisition of Stelco), that the current Conservative Government would oppose the transaction, particularly given that Canada’s foreign investment law regime was liberally amended last year as part of sweeping amendments to the Investment Canada Act to encourage more foreign investment and bring Canada in line with its other major trading partners.

As a practical matter as well, only one transaction has publicly been blocked out of more than 1500 applications for review since 1985.

Despite the widespread current debate, it remains to be seen whether any competing bidders will yet emerge in the play for Potash Corp., or whether the Chinese will indeed be successful in blocking or otherwise holding up the deal.

CANADIAN COMPETITION LAW LINKS

For more information about Canadian competition law or our competition law services visit our: Abuse of Dominance, Advertising and Marketing Law, Bid Rigging, Canadian Competition Law, Canadian Competition Law Compliance, Canadian Competition Law Home, Competition Act Amendments, Competition Bureau Investigations, Competition Law Courses and Conferences, Competition Law Litigation, Competition Law Publications, Competition Law Resources, Competition Law Services, Conferences, Conspiracy and Competitor Collaborations, Conspiracy – FAQs, Global Competition / Antitrust Law Resources, Global Competition Law Updates, Investment Canada Act, Merger Control, Merger Control FAQs, Private Actions, Promotional Contests, Publications, Refusal to Deal, Team, Trade Associations or Trade Association Cases pages or visit our website at www.NortonStewart.com.

CONTACT US

We provide Canadian competition law and consulting services to Canadian and international clients. For more information about our services contact us at steve@nortonstewart.com, info@competitionlawcanada.com or call us on +1 604 687 0555 or +1 778 867 5558. Visit us on the web in Toronto at www.torontocompetitionlawyer.com or www.torontocompetitionlaw.com.

New Global Competition/Antitrust Law Resources Pages

admin — Sun, 05 Sep 2010 19:09:38 +0000

We are pleased to launch our new global competition/antitrust law resource pages including: Global Competition Law – Links & Resources, Global Competition/Antitrust Agencies, Global Competition/Antitrust Law Books, Global Competition/Antitrust Law Updates, Competition/Antitrust News Links and Global Competition/Antitrust Law Organizations.

We will continue posting Canadian competition/antitrust law updates and will be expanding our international competition law updates to include updates from our friends and contacts in Asia, the U.S., Europe, Africa and the Pacific.

CANADIAN COMPETITION LAW LINKS

CONTACT US

Competition Policy International Competition/Antitrust Law Update – Antitrust Chronicle – Canadian Edition

admin — Thu, 02 Sep 2010 03:04:02 +0000

We are pleased to announce that our recent note on the CREA abuse of dominance case (“The CREA Abuse of Dominance Case: Competition Bureau Challenges Organized Real Estate in Canada”) was published today in Competition Policy International’s Antitrust Chronicle (Canadian edition). For a link to the note and other Canadian competition/antitrust law notes published by Competition Policy International, see: Competition Policy International – Antitrust Chronicle – Canada Edition.

CANADIAN COMPETITION LAW LINKS

CONTACT US