PotashCorp takeover may end Canpotex export group - analysts

19 August 2010 23:03  [Source: ICIS news]

TORONTO (ICIS)--BHP Billiton’s planned $40bn (€31bn) takeover of Canada’s Potash Corp of Saskatchewan (PotashCorp) will likely put an end to the Canpotex export group, thus changing the way potash is marketed and priced on global markets, Canadian analysts said on Thursday.

Canpotex has marketed and distributed potash from Canada's Saskatchewan province to overseas buyers since 1972. Its potash sales are 8m-9m tonnes/year, according to Canpotex.

Jacob Bout, an analyst with CIBC bank, said that if BHP Billiton were successful, it would likely want to go it alone, rather than sell through Canpotex.

With the loss of its largest member, Canpotex, which also includes Agrium and Mosaic, would come to an end, he said.

Mario Maselli, market strategist for Chicago-based futures trading firm Lind-Waldock told Canadian business television that BHP was keen on making its own mark in potash, after an earlier attempt to merge with mining firm Rio Tinto failed. 

The analysts' comments came after BHP chief executive Marius Kloppers said earlier that his company’s strategy was to run its assets throughout the cycle, in good times and bad times, and that it preferred to market itself to its customers.

However, Kloppers said that BHP would respect PotashCorp’s existing commitments to Canpotex. Those arrangements, however, were not public, he added.

Analysts also noted that BHP preferred to sell its iron ore and other commodities under short-term pricing arrangements, rather than long-term contracts with customers.

A dissolution of Canpotex would affect the Saskatchewan provincial government, which gets royalties from the province's potash industry.

Saskatchewan’s energy minister, Bill Boyd, told media here that Canpotex had proven itself in the past.

Going forward, the province would want to ensure that it would continue to maximise value from its potash resources, he said.

PotashCorp is a former Saskatchewan Crown Corporation that was privatised in 1989. Under Saskatchewan law the company must maintain a head office in the province.

Meanwhile, Canadian analysts and media commentators remained divided over whether PotashCorp would soon draw a rival bid.

Some pointed to a Chinese state-backed firm such as Sinopec, SinoChem or Sinofert as a likely bidder, given the importance of secure potash supplies for China’s growing market.

However, others said a Chinese state-backed firm would not be able to act quickly enough to mount a viable bid as Canadian corporate law set tight deadlines for takeovers.

Also, Canadian regulators could be wary of a bid by a Chinese state-backed firm for the world’s largest fertiliser company, they said.

In related news affecting potash markets and prices, Russian producers Uralkali and Silvinit may be working on merging their businesses, market sources told ICIS.

PotashCorp closed at $148.84, up 0.62%, on the New York Stock Exchange. This compares with BHP’s offer price of $130/share.

On Tuesday, when BHP’s bid was publicly disclosed, PotashCorp’s shares jumped 31%.

($1 = €0.78)

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By: Stefan Baumgarten
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