Sign in Subscribe
Banking industry

China Blocks BHP's $130-Share Bid for Potash Corporation

Strategic Insights

— 1 min read

Chinese officials have instructed state-owned companies, including Sinochem, to explore options to counter BHP Billiton's $25 billion bid for Potash Corporation. The move is part of Beijing's efforts to block BHP's hostile bid and maintain China's dominance in the global fertiliser market. China is the largest importer of fertiliser, used to feed its 1.3 billion-strong urbanising population. Chinese companies, backed by the country's $200 billion sovereign wealth fund, China Investment Corporation (CIC), and China Development Bank, are likely to have deep pockets to make a counteroffer.

Key Takeaways:

  • Chinese officials have ordered state-owned companies to meet with investment bankers to explore options to scupper BHP's $25 billion bid for Potash Corporation.
  • Sinochem is holding meetings with bankers, including Citi, Deutsche Bank, HSBC, and Morgan Stanley, to secure a role in any counteroffer.
  • Bankers across China are scrambling to secure a role in any counteroffer by Sinochem, which could run into tens of billions of dollars.
  • Chinese companies will receive funding from Beijing's $200 billion sovereign wealth fund, China Investment Corporation (CIC), and China Development Bank.
  • Potash Corporation is wholly welcome to new offers, and its valuation is estimated to be around $30 billion based on a maximum price of $155 per share by Thomson Reuters.

Statistics:

  • BHP Billiton's $25 billion bid for Potash Corporation is the largest bid in the history of the global fertiliser market.
  • China is the largest importer of fertiliser, accounting for 30% of global demand.
  • China's $200 billion sovereign wealth fund, China Investment Corporation (CIC), has invested in numerous global acquisitions, including Rio Tinto in 2008.
  • The Chinese Development Bank had provided funding for several large-scale acquisitions, including BHP's failed Rio Tinto bid in 2008.
  • Potash Corporation's valuation is estimated to be around $30 billion based on a maximum price of $155 per share by Thomson Reuters.

Sources:

  • Bloomberg News
  • Thomson Reuters
  • Credit Suisse
  • Reuters
  • CNN

Read more