August 27, 2010
The Globe and Mail has reported that there is speculation that Chinese bidders may emerge in the play for Potash Corp., to rival BHP Billiton Ltd.’s USD $38.6 billion hostile bid. According to the Globe, potential Chinese bidders include Sinochem Group (chemical conglomerate and China’s largest fertilizer trader, with its fertilizer unit Sinofert), China National Offshore Oil Corp. (energy firm – CNOOC Ltd.) or China Investment Corp. (CIC, China’s sovereign wealth fund). Yesterday, Sinofert’s CEO Feng Zhibin told reporters in Hong Kong that the companies “continue to closely watch the deal” but did not comment on whether they were considering a rival bid.
According to Reuters Sinofert (Sinochem Group’s fertilizer unit) has said that it is worried about the impact of the BHP/Potash transaction, but would not say whether its parent Sinochem was planning to launch a rival offer. Potash is a shareholder and significant supplier to Sinofert.
Forbes.com has also speculated that another rival Chinese bidder could include Chinese private-equity fund Hopu Investment Management.
The Wall Street Journal’s China Real Time Report reports that Chinese government officials have fanned out across the country urging greater use of fertilizers to enhance this year’s output of rice. See: As Potash Drama Unfolds, China Flogs Fertilizers. According to the Wall Street Journal, the Chinese government’s efforts are not related to the BHP bid for Potash, but rather worry over the coming fall grain harvest. According to the Wall Street Journal, Chinese companies have five potash projects in Laos (one of which is in production), are pursuing two Canadian potash exploration projects and have two projects in the Congo. China is in fact the world’s largest consumer of potash.
Commentators are also saying that a Chinese bid could face increased scrutiny from Investment Canada, and in particular under Investment Canada’s Regulations for investments by foreign state-owned enterprises.
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