Russia May Allow Its Two Largest Potash Producers to Merge, Watchdog Says

Russia may consider allowing the merger of its two largest potash producers, OAO Uralkali and OAO Silvinit, while placing restrictions on what would become a national monopoly, the country’s antitrust watchdog said.

“It will be a monopolist, so we should weigh pros and cons, but I can’t say ‘No, we’ll never allow it’,” said Andrei Tsyganov, deputy chief of the Federal Antimonopoly Service, in an interview today in Moscow.

“If such a deal goes ahead, it can only be permitted with restrictions,” he said. Neither of the companies, nor their trading units, has yet filed an application seeking permission to merge, Tsyganov said.

Developments in the Russian potash industry may become “even more interesting” following BHP Billiton Ltd.’s $40 billion bid for Potash Corp. of Saskatchewan, Tsyganov said, without commenting further.

Russian billionaire Suleiman Kerimov and partners acquired controlling stakes in Uralkali and Silvinit between June and August. Kerimov may merge the two Russian potash producers, using Uralkali’s balance sheet to acquire Silvinit, VTB Capital said in a research note today.

“Different merger plans involving Russian potash producers are being discussed,” including retaining them as separate companies, Tsyganov said.

One option could be the combination of Uralkali and Silvinit with Minsk, Belarus-based Belarusian Potash Co., a trader representing Uralkali and Belaruskali, Tsyganov said.

Putin’s Permission

Silvinit currently sells production through its trading unit, International Potash Co.

Rio Tinto Group, the third-largest mining company, and Potash Corp., the world’s largest producer of the soil nutrient, are each seeking to buy between 10 percent and 15 percent of Uralkali, Vedomosti reported on Aug. 13.

The two companies will need permission from the government commission on international investments, chaired by Prime Minister Vladimir Putin, should they buy a stake of more than 10 percent, Tsyganov said. No such applications have been filed with the watchdog to date, he said.

To contact the reporters on this story: Maria Kolesnikova in Moscow at mkolesnikova@bloomberg.net

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