Tension are mounting in finding the white knight that will eventually buy out Canada based Potash Corp, the world’s top fertilizer maker in what could possibly be one of the largest deals in corporate history. Post rejecting BHP Billiton’s US$130-a-share bid, totalling US$39 billion in August as too low, the two largest parties in contention seem to remain China’s chemical hungry Sinochem, a state-owned Chinese chemical group and the Ontario Teachers Pension Fund which has reached out to Singapore based Temasek for a joint bid.
While the Ontario Teachers Pension Fund, regale in the support of the Canadian government, Sinopec’s chances might have narrowed last week after a report sponsored by the province of Saskatchewan advised of the dangers of PotashCorp falling into the hands of a state-owned Chinese company. However Sinopec is not giving up.
In the latest turn of events, Sinopec which has hired Citigroup and Deutsche Bank to explore its options is believed to have approached India’s National Mineral Development Corporation , or NMDC Ltd for a joint bid to acquire Potash Corp. While this is not the first time Sinopec will collaborate with Indian companies for a more secure future, if the Chinese and Indian chemical companies agree to co-operate, and do offer a joint bid, the ensuing deal will benefit both nations. PotashCorp, which controls a fifth of the world’s fertiliser output, is in great demand in both China and India, agrarian economies with raising populations.
Although India is currently the world’s biggest potash importer and is keen to decrease its dependence on urea, upping potash investments, funds will be an issue. While Sinopec, backed by the Industrial and Commercial Bank of China , the world’s largest bank by market capitalisation will be able to up its bid from its initial offer of US$ 39 billion, NMDC doesn’t have the capacity to contribute anything more that US$1-2 billion, which would give it a 5 percent share. India’ agriculture ministry will need to work out what will NMDC gain from such a small share.