Report: Chinese company asking government approval for Potash bid but deal might be too big

Report: Chinese company weighing Potash bid

BEIJING — A state-owned Chinese chemical company is seeking Cabinet approval to make a competing bid to mining giant BHP’s $38.5 billion offer for Canada’s Potash but says such a deal might be too big and impractical, a business magazine reported.

Beijing has expressed unease that a BHP Billiton Ltd. takeover of Potash Corp. of Saskatchewan might create a “potash monopoly” that would boost prices and hurt China, a major importer of the mineral used in fertilizer.

Sinochem Corp. submitted a report to the Cabinet on a possible Potash bid, seeking support such as low-interest loans, Caijing reported, citing unidentified sources. Sinochem owns Sinofert, China’s biggest potash importer and fertilizer producer. Caijing said the Cabinet has not issued a decision and asked Sinochem for further analysis of its plans.

Caijing quoted a Sinochem vice president, Han Gensheng, as calling such a bid “too big and not worthwhile.” The report was removed temporarily from Caijing’s website Thursday and when it reappeared the portion citing Han was removed, though it still said Sinochem was proposing a bid. The website gave no explanation for the change and calls to Caijing’s offices were not answered.

The change might reflect government efforts to keep a low profile while Beijing looks for ways to thwart BHP’s proposed acquisition.

A Sinochem spokesman declined to comment.

Potash rejected BHP’s initial bid last month as too low and says it has talked with other parties in what is likely to be a lengthy process.

Canadian officials are wary of a possible Chinese takeover of Potash. Saskatchewan’s resources minister said last week a state-owned Chinese buyer would want to overproduce and drive down prices, which would hurt the province financially.

There has been almost no mention in China’s state-controlled business press of a possible Chinese bid for Potash, possibly reflecting orders to editors to avoid drawing attention to the topic.

In the government’s first public comment on the BHP bid, a Commerce Ministry spokesman said Wednesday that Beijing “will be paying close attention to this deal” and sees potash as a “critical factor” in agriculture.

China regularly clashes with potash producers over prices. Contract talks with Canadian suppliers broke down this year after Beijing demanded a much lower price than they would accept.

BHP is hoping to profit from what it expects will be rising fertilizer demand in China and India — the main markets for potash, along with the United States and Brazil.

A BHP takeover of Potash would be likely to face an anti-monopoly review by China because Potash owns a 22 percent stake in Sinofert.