Thursday, September 16, 2010

Potential Potash (NYSE:POT) Suitors Shrink as Sinochem Declines to Bid

The number of companies that could acquire Potash (NYSE:POT) are few to begin with, and evidently BHP Billiton (NYSE:BHP) did its homework in coming up with their bid price, as Sinochem is the latest to say they're not interested in the company based on the price and potential political hurdles.

Potash CEO Bill Doyle has made claims there are better offers on the table, but that seems to sound hollower the more the process goes on.

Major miners like Vale SA (NYSE:VALE) and Rio Tinto (NYSE:RTP) have already said they're not interested, and smaller competitor Teck Resources (NYSE:TCK) have said they haven't really even thought about it much.

There are few left who would want to put out more than the $38.6 billion offered by BHP, and it remains to be seen whether there are really any other offers that are truly better than the only one on the table.

No other Chinese companies are interested at this time either, as according to spokesman for China's Ministry of Commerce, Yao Jian, there haven't been any applications from any company run by the state concerning Potash.

For China, it isn't necessarily having the finances to acquire Potash, as somehow the funds would be made available, it's probably entering into the distracting process which would assuredly be resisted by the Canadian government for any state-run company.

So with China probably out of the way, it seems like a bare cupboard for Potash, and they may have to deal directly with BHP going forward.

It's possible a company completely out of the sector could come in and buy up Potash, but the question still remains on who would do it and why.

Slowing economic conditions are another factor, which taking on a huge debt load could crush the revenue, earnings and credit rating of a company.

If things continue to be slow economically for several years, which is highly possible, only a company like BHP could migrate through the challenges successfully and hold out till things turn around.

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