September 29, 2010 7:20 pm

Sinochem struggles to mount Potash bid

Sinochem of China is struggling to find partners to mount a counterbid for PotashCorp and derail BHP Billiton’s $39bn hostile takeover following the collapse of talks with a potential Russian partner.

PotashCorp deal dashboard
The deal for Potashcorp

The failure of talks with UralKali, the Russian fertiliser group, is the latest setback for the state-owned Chinese chemical group after earlier approaches to a Canadian public pension fund, and Temasek, the Singapore’s investment agency.

Bankers believe Sinochem needs several partners, including non-Chinese companies, to mount a serious rival bid to BHP Billiton and assuage fears in Ottawa about the sale of PotashCorp to a Chinese state enterprise.

PotashCorp is the largest global producer of mineral fertiliser, demand for which is soaring in China, India and other emerging economies.

Six weeks after BHP Billiton launched its all-cash offer for the Canadian company at $130 per share, bankers said there was no sign of a firm rival bid. But PotashCorp investors remain convinced that a fresh offer, from a Chinese-led consortium or a sweetened bid by BHP Billiton, will emerge.

Bill Doyle, chief executive of PotashCorp, has repeatedly said BHP Billiton was not the only interested party for the Canadian fertiliser company, suggesting a “universe” of alternative options could derail the miner’s hostile bid.

Sinochem had been in talks with UralKali about forming a consortium to bid for PotashCorp, three people close to talks told the Financial Times.

But the talks collapsed last week after a court in Cyprus, where many Russian holding companies are registered, froze the 25 per cent stake in UralKali held by Suleiman Kerimov, the company’s largest shareholder, the people said.

Mr Kerimov, with two associated businessmen, bought control of UralKali in June.

One person familiar with the talks said an extension of the freeze on Mr Kerimov’s stake to November 17 issued this week had “effectively precluded [UralKali] from entering into any further discussion”.

The freeze, ordered by a Nicosia-based court on more than $6bn worth of Mr Kerimov’s business empire, relates to a dispute with a Moscow businessman, and is not linked to UralKali or the Sinochem talks.

UralKali also held talks with Glencore about the involvement of the commodities trader on a potash marketing deal linked to PotashCorp.

People close to the deal said Uralkali’s talks with Sinochem had been serious, but the industry expressed scepticism about their ability to bid.

PotashCorp, Sinochem, Glencore and a representative of Mr Kerimov declined to comment.

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