China Says It's Had No Applications to Bid for Potash Corp, Challenge BHP

China, the world’s largest consumer of metals, said its companies haven’t applied to bid for Potash Corp. of Saskatchewan Inc., the Canadian fertilizer producer fending off a $40 billion offer from BHP Billiton Ltd.

The Chinese government “will support, encourage” companies that want to venture overseas as part of its general policy, Ministry of Commerce spokesman Yao Jian said today in Beijing. The ministry hasn’t received any applications for Chinese bids, Yao said, responding to a question on whether Sinochem Group has filed for permission.

“Investing in resources overseas is a very complicated issue, and companies should be aware of the risks,” Yao said, without elaborating or specifying companies.

The lack of a Chinese counteroffer so far may strengthen BHP’s bidding position, and success will give the world’s biggest mining company more control over the supply of commodities into China. Chinese investors approached Alberta Investment Management Corp. to consider a joint offer for Potash Corp., the Canadian pension fund said Sept. 2.

“Canada historically hasn’t been receptive to acquisitions by state-owned enterprises,” Glyn Lawcock, an analyst at UBS AG, said. Lawcock said China is unlikely to make a bid.

Sinochem Group, China’s largest fertilizer trader, made initial inquiries with Potash Corp.’s board about the possibility of holding talks, a person with knowledge of the matter said last month. Sinochem and its Sinofert Holdings Ltd. unit are “closely watching” BHP’s bid, Sinofert’s Chief Executive Officer Feng Zhibin said Aug. 26.

Other Suitors

Potash Corp., the biggest fertilizer producer, has rebuffed Melbourne-based BHP’s $130 a share offer and said it was seeking other suitors. China is monitoring BHP’s bid for Potash Corp. closely, the commerce ministry’s Yao said today.

Any Chinese offer would have to overcome objections from the Saskatchewan government, which said an offer by state-owned enterprises won’t be in the interest of the province where Potash Corp is based. A state-owned company may lower prices which won’t be in the interest of taxpayers, the province’s Energy and Resources Minister Bill Boyd said.

China will review BHP Billiton’s bid for Potash Corp. should the deal go ahead and BHP make an application under the nation’s anti-monopoly law, Yao said at the regular briefing.

Teck Resources

Teck Resources Ltd. is not involved in any possible rival bid, the Globe and Mail reported yesterday, citing Chief Executive Officer Don Lindsay. China Investment Corp., a sovereign wealth fund of the Chinese government, owns about 17.5 percent of Teck Resources according to data compiled by Bloomberg. It’s unlikely Teck will get involved in potash, the paper reported, citing Lindsay.

Demand is increasing for potash, a form of potassium mined in Canada, Brazil, Germany and the U.S., and used to boost crop yields by improving the ability of plants to withstand dry soil. China, the biggest consumer of rice, wheat and soybeans, needs more productive farmlands as it wants to supply food for 22 percent of the world’s population using less than 10 percent of the globe’s arable land.

“A number of Chinese companies might be able to afford to buy Potash Corp.,” Xu Hongzhi, an analyst at Beijing Orient Agribusiness Consultant Co., said Aug. 20. “The question is whether the company or the Canadian government will allow their strategic resource to be controlled by the Chinese.”

--Li Yanping, with assistance from Huang Zhe, Elisabeth Behrmann in Sydney and Jesse Riseborough in London. Editors: Tan Hwee Ann, Matthew Oakley.

To contact the Bloomberg News staff on this story: Yanping Li in Beijing at yli16@bloomberg.net

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