China may launch an antimonopoly probe into BHP Billiton's $39 billion bid for Canada's Potash Corp, the China Business News said on Wednesday, citing a source familiar with the matter. China will also review the merger of two Russian potash firms - Uralkali and Silvinit - given the major impact the two deals would have on China, the paper cited the unnamed source as saying.
The report was another indicator that China, the world's biggest importer of fertiliser, is wary of further concentration in the market, following BHP Billiton's launch of a hostile bid for Potash Corp last month. But it was unclear what steps, if any, Chinese regulators could take in opposition to the bid.
BHP declined to comment on the newspaper report, and China's Ministry of Commerce was not immediately available to comment. BHP has said the deal only needs approvals from regulators in Canada and the United States, where Potash Corp sells around half its production.
China buys around 7 percent of the output of Potash Corp, which controls around one-fifth of world production of the key crop nutrient. Potash demand in the country has been growing by around 5-8 percent a year, faster than other fertilisers. China consumes about a third of Russia's potash output, so it was not surprising that Beijing was closely following the potential of Uralkali and Silvinit teaming up to create the world's second-biggest group in the sector after Potash Corp.
"China is one of the key consumers of Russian potash, and it is natural for China to be worried that a merger would lead to an increase in average prices, but it has no way to influence the process," said analyst Anna Kupriyanova at Uralsib in Russia. The Russian deal is expected to get speedy approval from Russia's own anti-monopoly authorities since it was supported by the state, she added. Russia's deputy prime minister said on Wednesday he did not oppose the union of Uralkali and Silvinit.
BHP Billiton does not currently produce any potash but does have potash resources it could develop in the future, including the massive Jansen project in Canada. The mine would begin producing in 2016 at the earliest, if the company approves development in 2011.
China's largest fertiliser distributor, Sinofert Holdings Ltd, said last week it was worried about the impact that a BHP deal would have but would not say if its parent, Sinochem, was planning a rival offer. Government departments and state-owned Sinochem Group have held meetings recently to review the possible impact the two high-profile acquisitions could have on China and about possible countermeasures, according to the source quoted by China Business News on Wednesday.
BHP may yet have to submit paperwork on the deal to China's anti-monopoly regulators. According to Chinese law, its regulators have jurisdiction over a foreign merger if two of the parties each have over 400 million yuan ($58.7 million) in sales in China in the last fiscal year and if their world-wide sales exceed 10 billion yuan. The BHP Billiton bid for Potash Corp appears to meet that criteria.
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