According to last Monday’s New York Times, Andrew Ross Sorkin wrote about concern over a controlling bid for ownership of Potash Corporation, a Canadian fertilizer company, placed by a consortium of Chinese companies and financiers. Sorkin indicates that the writing on the wall from such scrutiny is, “‘Do we really want the Chinese to control the company that has the largest capacity to produce fertilizer?'”
The Potash Corporation currently sells 45% of its product to farmers in North America. Acquisition of the company could give the Chinese the ability to direct that potash to Chinese farmers and keep food prices as low as they see fit. Though this may help consumers around the world, but it would not help Canada, which earns greater revenue if the price of fertilizer stays high, thereby helping its tax base.
If the Chinese companies won the bid, China could effectively decide to limit the supply of potash to within its borders, significantly impacting the global food supply. With China’s recent halt of rare-earth element shipments to Japan, there seems to be reason for this kind of worry.
Due to the controversy surrounding the offer, analysts believe that China will ultimately not go through with the bid. BHP Billiton, an Australian commodities company, has also made a $38.6 billion dollar offer. According to the article, “the ‘back up against the wall’ feeling doesn’t seem to be nearly as pronounced with BHP as it is with a Chinese state-sponsored bid.”
Posted by Rishi Sidhu.
Photo credit: Bloomberg Businessweek.
