Wednesday, September 8, 2010

China Circling Potash (NYSE:POT) Bait

In one of the first open moves revealing their interest in Potash Corp. (NYSE:POT), China's state-owned Sinochem Corp. has requested Temasek, the sovereign wealth fund of Singapore, to become part of a consortium to make a competitive bid against the BHP Billiton (NYSE:BHP) bid of about $39 billion.

Chinese leaders had ordered the state companies to get involved with the process recently, seeking for ways to overcome the BHP acquisition of Potash.

China has little in the way of potash and other fertilizers, and would be vulnerable to increased pricing based on the known demand in the country.

They're still quietly fuming about the iron ore pricing they were forced to accept in order to meet the demand of their domestic steel market.

The China story has changed over the last week, as originally few thought Canada or Saskatchewan would allow a Chinese company, especially a state-owned one, acquire the fertilizer giant.

That has recently changed with Canada changing its tone.

Of course China is probably inviting other countries and/or companies to join their effort to dilute their share in the company in order to make officials feel more comfortable about doing a deal with them.

Unnamed sources say Temasek, which has $134 billion in assets under management, hasn't made a decision yet on the proposal from Sinochem.

Although there is no clarity on whether a bid would be to acquire the company or to buy a stake to block the sale, more than likely it would be an attempt to buy the entirety of Potash and not only a strategy to block the sale.

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