Russian company plans to bid for Potash

By Reuters
Posted Nov. 3, 2010 at 5:39 a.m.

Russian fertilizer company Phosagro plans to bid for Potash Corp, according to a media report, rivalling BHP Billiton’s $39 billion offer awaiting a crucial ruling from the Canadian government. Phosagro Chairman Vladimir Litvinenko has asked Russian Prime Minister Vladimir Putin to approve a potential deal and request financing from Russian banks, Russian business daily Vedomosti reported on Wednesday.

The report reignited speculation about a possible bidding war in the world’s biggest takeover for 2010 and came on the day Ottawa is expected to tell BHP whether it will approve or reject the deal.

Vedomosti cited a letter from Litvinenko to Putin, a close ally since Putin defended his 1997 Ph.D. thesis at the St. Petersburg institute where Litvinenko is rector.

Privately held Phosagro was not immediately available for comment on the report while BHP and Potash declined to comment.

Analysts said it appeared unlikely Phosagro had the financial firepower to make a rival bid unless in conjunction with other Russian players Uralkali and Silvinit — being merged by potash tycoon Suleiman Kerimov.

“Only if Phosagro, Uralkali and Silvinit combined into a single $25-30 billion company and consolidated their funding capabilities would the remote potential to make a bid for PotashCorp appear,” Troika Dialog analyst Mikhail Stiskin said in a note.

He added that a successful bid would put Russia in control of 65 percent of global potash trade — a key component of world food supplies.

Credit Suisse analysts said Potash Corp. could have drummed up the Russia bid as a “white knight” defense to the unwelcome BHP offer, adding there was “little likelihood” that a takeover would come about.

Phosagro, which Moscow’s VTB Capital said had 2009 sales of $1.8 billion, does not disclose its shareholder structure but market players say it is controlled by billionaire senator Andrei Guryev.


Two Canadian newspapers reported on Tuesday that bureaucrats were advising the government to allow BHP’s bid for the world’s largest fertiliser market although rumours swirled in the markets that Ottawa would block it.

The federal Canadian government will announce its decision on Wednesday, a source close to the matter told Reuters on Tuesday. Ottawa has until the end of Wednesday to make its ruling public.

No serious rival bidders for Potash have emerged so far. Potash has said it held talks with 15 strategic, financial and state-sponsored potential bidders and investors but admitted in a tough market, a white knight would need more time to raise financing.

Potash has flatly rejected BHP’s current $130-a-share offer as inadequate and has repeatedly said it expects other offers.

The Russian newspaper quoted Litvinenko as saying in the letter he knows well Canada’s government officials who make decisions on the matter as well as Potash’s senior management and that they were not against an alliance with Russia.

Phosagro has also secured preliminary agreements with Canadian banks over providing half of financing needed for the deal, while Russian banks should provide the rest, the paper said.

Potash Corp. shares ended 1.1 percent lower in New York on Tuesday, while BHP Billiton’s shares closed up 0.8 percent in Sydney on Wednesday.

BHP stock eased in London after rising the previous session on market talk that Canada would block a takeover of Potash or impose tough conditions that would scupper the bid.

A “yes” from Ottawa will likely prolong the takeover battle and it may well force BHP to raise its bid.

Since BHP announced its bid in late August, the stock has held well above the offer price, as investors bet that a higher bid will eventually emerge.

Canada’s Conservative minority government risks alienating its political allies in Saskatchewan if it allows the bid. But the pro-business government risks sending a damaging anti-market message to the global investment community if it blocks the takeover.

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