So PotashCorp says it was “contacted” late last week by China’s Sinochem Group and Brazil’s Vale as it sought to fend off the $39bn hostile bid from BHP Billiton, reports Bloomberg on Monday.
Citing a person with knowledge of the matter, the news agency says:
Sinochem and Vale made initial inquiries with Potash Corp.’s board of directors late last week about the possibility of holding talks… Other companies also contacted the board of the world’s biggest fertilizer producer, and talks may not materialize, the person said.
It’s (very) early days yet, but if Sinochem is serious in following up its “initial inquiry [sic.]“, it could end up as a tricky game for PotashCorp. As one analyst told Bloomberg (our emphasis):
“If the Potash board decides to go with the poison pill of having a Chinese company – Sinochem – buy a stake, and BHP goes ‘let’s get out of here,’ they’re then left with the Chinese on the register,” Glyn Lawcock, an analyst at UBS AG, said by phone from Sydney. That “then becomes basically an inhibitor to any future flows. Then their share price is going to fall dramatically,” he said.
Of course, it is entirely logical that China’s biggest trader of fertiliser and chemicals — and the country’s single largest consumer of commodities — would want to stop the Anglo-Australian miner from controlling more of its vital supplies, especiallly in light of China’s increasingly rocky negotiations over iron ore in recent years.
PotashCorp already owns a 22 per cent stake in Chinese state-owned fertiliser producer Sinofert, and could work with its owner Sinochem — which holds 53 per cent — on a deal, the FT noted last week.
A phone line running hot with potential bidders eager to take on a $39bn hostile bid from the world’s biggest miner is all very handy for PotashCorp – particularly in light of BHP’s plan to launch a mega-charm offensive in PotashCorp’s heartland of Canada this week.
Vale, meanwhile, has been gobbling up fertiliser assets — so to speak — at a striking pace, spending nearly $5bn so far this year on acquisitions in the sector, as Lex noted.
But who are these “other companies”, we wonder? As widely noted following BHP’s initial offer, there are not many groups in the world who could trump a $39bn price tag.
BHP meanwhile is anxious to convince Canadian regulators and PotashCorp shareholders of the value of its hostile bid, after PotashCorp’s board last week slammed BHP’s $130 per share offer as “grossly inadequate”.
As the FT reports on Monday, the clock has started ticking on BHP. In the 60-day first round of the offer, PotashCorp shareholders can choose to tender their shares to BHP for $130 each in cash before October 20.
It doesn’t help BHP, though, that PotashCorp’s shares ended the week at nearly $150 in New York, amid growing expectations of a higher offer. Little wonder that PotashCorp has moved to trumpet the “contact” it has had from various potential suitors.
As for Sinochem, rumours persist about its interest in PotashCorp – although, needless to say, there is no mention of any of the numerous media reports to that effect in the “media coverage” section of its website.
We’ll let Sinochem have the last word, in a remark that might be expected from a company billed as a potential counter-bidder, but is striking considering it comes from a Chinese state-owned company. As Li Qiang, head of the president’s office at Sinochem, told Bloomberg on Monday:
“We are closely watching BHP Billiton’s bid for Potash Corp… This is big news for the industry and it’s only natural that everyone is looking at it. I cannot verify that Sinochem and Potash have been in any form of contact.”
Related links:
More potash, more problems – FT Alphaville
A legacy of potash – FT Alphaville
In-depth report, BHP-PotashCorp – FT