Sinochem drops Potash bid plan: report
Beijing/Singapore— Reuters
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China’s Sinochem Corp. will not launch a counterbid for Potash Corp.(POT-T148.22-0.48-0.32%), sources told Reuters on Friday, abandoning efforts to spoil BHP Billiton Plc’s $39-billion (U.S.) bid for the Canadian fertilizer maker.
The Chinese state-owned chemicals group, which appointed Deutsche Bank and Citigroup last month as it looked at putting together a consortium to thwart BHP’s hostile offer, had decided not to proceed, three sources with knowledge of the matter said.
“It’s finished,” one of the sources said.
Another source said the idea of Sinochem forming a counterbid group, potentially involving sovereign wealth funds and industry players, had faltered in recent weeks.
“I’d be surprised if the Chinese formalized their withdrawal, but there’s no ... way they are doing anything. It’s been dead for five to six weeks,” one source said.
The sources declined to be identified because they were not authorized to talk to media.
Sinochem’s decision to stand down removes a potential obstacle to BHP’s ambitions to own the world’s largest fertilizer maker, although it must still convince Potash shareholders and Canadian regulators and politicians to back its offer.
China’s main worry is that a BHP(BHP-N82.740.740.90%)takeover of Potash could push up the price of potash, a nutrient essential for boosting grain production to meet booming food needs. Sources said Sinochem would not bid without a positive signal from the Canadian government which was worried about Chinese ownership.
“The answer probably would have been no as they (Canada) don’t like the idea of a supplier also being a customer. That would have been the big sticking point,” said Peter Chilton, an analyst at Constellation Capital Management which owns BHP shares.
“At this point in time no-one else has come out of the woodwork to bid (against BHP). Without the Chinese there is not a lot left I can think of.”
Officials in Potash Corp’s home province of Saskatchewan, which relies on the company for billions of dollars in royalty revenue, fear the Chinese would work to hold down prices for the agricultural input that the country needs to feed its growing population.
British newspapers said this week that Potash was considering defensive moves, including a break-up. They also reported Canada’s Ontario Teachers Pension Plan (OTPP) had talked to Singapore investment fund Temasek about launching an offer with Canada’s Teck Resources (TCK.B-T46.600.611.33%).
However, analysts played down the likelihood of those efforts succeeding.
Sinochem had also approached Temasek to join a consortium that might bid but the state investor had made no decision, sources have previously told Reuters. Temasek declined to comment on Friday.
Potash, Deutsche and Citi also declined to comment.
Sinochem spokesman Li Qiang declined to comment on its plans or whether it had withdrawn, but said it was still monitoring developments. Sinochem has never publicly stated its intention to bid for Potash.
Potash, the world’s top fertilizer maker, has flatly rejected BHP’s $130 per share offer and is seeking a white knight to fend off the world’s biggest miner. Potash shares last traded at $147.17, suggesting investors were expecting it to raise its offer.
Potash on Thursday asked a U.S. court to compel BHP to produce all communications with regulators and governments related to its bid.
BHP is under pressure to complete a deal. Its $116-billion proposed iron ore joint venture with Rio Tinto suffered a new blow on Thursday after Germany said it would ban the planned merger.
BHP’s Australian-listed shares closed one cent lower at A$41.65 on Friday.
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