In what is an increasingly bizarre reaction to the bid by BHP Billiton (NYSE:BHP) for Potash Corp. (NYSE:POT), another alleged bidder has reportedly left the field, with Sinochem from China reportedly dropping out of the race, according to a Reuters' report.
Canadian Federal Industry Minister Tony Clement has confirmed that, saying “There’s rumors of bidders, but no one has formally” made another bid on the company.
One interesting aspect of the Sinochem circumstance is they evidently dropped out of the running five or six weeks ago, suggesting the ongoing rumors were probably plants by Potash.
It also makes you wonder if the alleged interest of Temasek, the sovereign wealth fund of Singapore, and Canadian pension funds, are really interested at all, or have even made overtures in that direction.
Making a phone call to these entities by Potash doesn't mean they have an interest at all.
The bid by BHP of just under $40 billion is under review under the Investment Canada Act, with a new deadline of November 3.
Other than the noise from Potash and Saskatchewan politicians, most of those commenting on the bid don't think there is much to keep it from going forward.
Showing posts with label Sinochem. Show all posts
Showing posts with label Sinochem. Show all posts
Friday, October 15, 2010
Monday, September 27, 2010
Citigroup (NYSE:C), Deutsche (NYSE:DB) Hired by Sinochem for Counter Bid for Potash (NYSE:POT) Against BHP (NYSE:BHP)
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.
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.
Friday, September 17, 2010
Sinochem Back in Play with BHP (NYSE:BHP), Potash (NYSE:POT)?
Reports in Canadian and Chinese news outlets alleged Sinochem is back in play in the ongoing attempt to outbid BHP Billiton (NYSE:BHP) in their quest to acquire Potash (NYSE:POT).
This comes just a short couple of days after Sinochem had denied they wanted to pursue Potash.
Now it seems they've approached interests in Britain and others in hopes of generating interest in financing a bid for a consortium of buyers they're attempting to put together.
We reported earlier this week that Sinochem had approached Temasek Holdings of Singapore in hopes of convincing them to join their cause, and nothing has yet reportedly come of that.
This comes just a short couple of days after Sinochem had denied they wanted to pursue Potash.
Now it seems they've approached interests in Britain and others in hopes of generating interest in financing a bid for a consortium of buyers they're attempting to put together.
We reported earlier this week that Sinochem had approached Temasek Holdings of Singapore in hopes of convincing them to join their cause, and nothing has yet reportedly come of that.
Thursday, September 16, 2010
Potash (NYSE:POT) Looking to China Again Against BHP (NYSE:BHP)
The obsession of Canada, Potash (NYSE:POT) and Saskatchewan with being "delivered" from the bid by BHP Billiton (NYSE:BHP) is getting more bizarre by the day, as after Chinese company Sinochem - who was considered among leading white knights for the company - backed out, they are now pursuing some type of consortium, led by Chinese investors, to battle the bid.
None of this makes much sense for casual observers, as why would Potash and Canada prefer a bid from the Chinese over BHP?
It's about the socialist practices of the Provinces of Canada, in this case Saskatchewan, which has royalties they extract from Potash as a result of the Canadian monopoly through their price fixing with Canpotex, the marketing arm of the potash industry from Canada, which includes Agrium (NYSE:AGU) and Mosaic (NYSE:MOS), along with Potash.
BHP is a fierce competitor and has signaled they have little interest in remaining involved with Canpotex once the existing agreements have been fulfilled and ended.
This means BHP would harvest the potash at levels they want, and would compete on scale and price, and not the fixed and monopolized prices now being forced on farmers and ultimately, consumers.
It's about power and the loss of royalty fees which is at issue, and the reason they're gravitating toward China is it's a similar command-and-control economy as far as Potash goes. In other words, the Chinese understand and approve of the price fixing being done in Canada, and wouldn't oppose like competitors in the free market would.
Spin as they may try, this is about socialism and fascism, where government and corporate lines blur. The end game is who controls the price of potash, and how much the Province of Saskatchewan can siphon off from the company.
A BHP-controlled company would result in better prices and lower costs at the supermarket. The continuation of the current monopoly in Canada will continue to artificially inflate prices and keep them above market rates. That always scares governments attempting to interfere with and control business.
None of this makes much sense for casual observers, as why would Potash and Canada prefer a bid from the Chinese over BHP?
It's about the socialist practices of the Provinces of Canada, in this case Saskatchewan, which has royalties they extract from Potash as a result of the Canadian monopoly through their price fixing with Canpotex, the marketing arm of the potash industry from Canada, which includes Agrium (NYSE:AGU) and Mosaic (NYSE:MOS), along with Potash.
BHP is a fierce competitor and has signaled they have little interest in remaining involved with Canpotex once the existing agreements have been fulfilled and ended.
This means BHP would harvest the potash at levels they want, and would compete on scale and price, and not the fixed and monopolized prices now being forced on farmers and ultimately, consumers.
It's about power and the loss of royalty fees which is at issue, and the reason they're gravitating toward China is it's a similar command-and-control economy as far as Potash goes. In other words, the Chinese understand and approve of the price fixing being done in Canada, and wouldn't oppose like competitors in the free market would.
Spin as they may try, this is about socialism and fascism, where government and corporate lines blur. The end game is who controls the price of potash, and how much the Province of Saskatchewan can siphon off from the company.
A BHP-controlled company would result in better prices and lower costs at the supermarket. The continuation of the current monopoly in Canada will continue to artificially inflate prices and keep them above market rates. That always scares governments attempting to interfere with and control business.
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.
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.
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.
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.
Thursday, September 2, 2010
Potash (NYSE:POT) Getting Interest from Sinochem as they Hire HSBC (NYSE:HBC)
Adding credence to the rumor China's Sinochem may be interested in acquiring Potash Corp. (NYSE:POT), they hired HSBC (NYSE:HBC) to advise them on the options available to them.
This isn't to say there is a definitely going to be a bid from Sinochem, but it does show the seriousness to China of losing the resource to a major competitor.
China is buying stakes in companies, and entire companies, in an effort to prepare for the tremendous demand in food and raw materials the country will experience in the near future.
Potash has said in the past that they've held talks with Sinochem, but it's hard to know if it's a negotiation tactic or serious overtures.
Either way, there can be no doubt China in general is very interested in Potash Corp., and Sinochem is one of the stronger companies they have to bid for them.
One problem is a bidding war could start, and it would depend on how serious BHP Billiton is in securing Potash and its assets as to how high they could go.
This isn't to say there is a definitely going to be a bid from Sinochem, but it does show the seriousness to China of losing the resource to a major competitor.
China is buying stakes in companies, and entire companies, in an effort to prepare for the tremendous demand in food and raw materials the country will experience in the near future.
Potash has said in the past that they've held talks with Sinochem, but it's hard to know if it's a negotiation tactic or serious overtures.
Either way, there can be no doubt China in general is very interested in Potash Corp., and Sinochem is one of the stronger companies they have to bid for them.
One problem is a bidding war could start, and it would depend on how serious BHP Billiton is in securing Potash and its assets as to how high they could go.
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