Governments don’t want fertilizer companies to date outside the family
Potash, the salts that are mined and manufactured to make fertilizers, has been a hot commodity for years. The increase in global food demand because of population growth and improved living standards has triggered a bigger need for fertilizers. As a result, countries have come to view their potash producers as natural treasures, assets that should be protected. The latest example is Israel, where finance minister Yair Lapid said that he would oppose a sale of Israel Chemicals to Canada’s Potash Corp.
Potash Corp. already owns 14% of Israel Chemicals, which has sole mining rights to the Dead Sea. Israel Chemicals CEO Stefan Borgas also supports a merger and noted that Israel’s phosphate reserves are disappearing. But the Israeli government has the power to block a sale. Lapid said he would vigorously oppose a deal, saying Israel’s natural resources are a public asset. Even lobbying by Canadian foreign minister John Baird has not swayed Lapid.
It’s ironic that Potash Corp is facing Israeli government opposition to its takeover ambitions. Potash was on the other side of the fight in 2010, when Anglo-Australian mining firm BHP Billiton launched a $38 billion hostile bid for the Canadian company. The BHP offer for Potash caused others to also look at the Canadian company, including China’s Sinochem Group. The governor of Saskatchewan, where Potash Corp is located, launched a major campaign lobbying against the BHP proposal. The Canadian government eventually decided a sale of Potash Corp to BHP wasn’t in the country’s “national interest.”
Demand for potash has gone down a bit recently as some farmers switch to cheaper fertilizers. But the lure of agrochemical companies as takeover targets hasn’t diminished since increased food demand is here to stay. There are a host of small and big firms, like fertilizer company Mosaic or seed giant Monsanto, which are intermittently talked about as attractive partners. Monsanto is already in talks with Sinochem about cooperating on vegetable seeds, and the parties have also discussed a deeper tie-up—such as Sinochem taking a minority stake in Monsanto—in the past.
China often faces US opposition to deal overtures because of national security concerns. Russian companies, which are also big in the fertilizer world, would face similar obstacles. Even countries that are seen as more benign, like Canada, England and Australia have been deemed unacceptable. When it comes to certain natural resources, governments are making sure the family jewels stay within the family.
That should make fertilizer companies think long and hard about the politics surrounding a potential bid outside their borders. As BHP learned, local politicians are just as important, and sometimes more so, than national representatives. And sometimes, despite all the lobbying, they still say no.
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