Rumors continue to circulate that China's Sinochem is back in the game for making a bit for Potash (NYSE:POT) against BHP (NYSE:BHP), with Citigroup (NYSE:C) and Deutsche Bank (NYSE:DB) being hired to help finance a potential bid, according to a newspaper report.
While Sinochem continues to assert they're interested, they evidently haven't decided to take the step, but are rather putting financial pieces into place in case they do.
China was furious with BHP, along with Vale (NYSE:VALE) and Rio Tinto (NYSE:RTP) over iron ore pricing, and seem to believe if BHP were to land Potash Corp., it could result in higher potash prices years into the future.
That is actually a wrong assessment by China, as least as measured by past practices of BHP, who historically prefer to produce at market price rates, rather than attempt to control supply in order to keep potash prices at higher levels in order to protect margins and earnings.
This is what the big stink in Canada is about when BHP said they would eventually leave Canpotex once current agreements were fulfilled. That has Saskatchewan particularly upset, as they perceive royalty money extracted form Potash Corp. shrinking.
More than likely that's not true, as volume would make up for lower margins, similar to how Wal-Mart (NYSE:WMT) has low margins but turns their inventory over at incredible rates to make up for it.
Add to this the higher probability of Canada opposing a takeover of Potash by a Chinese government-controlled company, and it seems a step backward from BHP.
Unless Canada decides they don't want BHP at any price to own Potash, it's hard to see on what basis they could legitimately reject the deal.
More than likely the shareholders of Potash will be the determining factor, and if they get it in their heads BHP will pay far more than the current offer, we will probably see the deal thwarted in that regard, rather than from regulatory hurdles.
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