China expands potash holdings (The Australian – April 21, 2015)

Dow Jones – China’s sovereign-wealth fund took command of a 12.5 per cent stake in embattled Russian potash producer Uralkali Tuesday by exercising an option on a convertible bond it bought late last year.

The step represents a big move by China–the world’s largest consumer of the fertiliser additive–to secure steady supply in a market where governments have zealously protected against foreign ownership in the past. The deal comes amid a bruising trade battle between Uralkali and Belarus over the collapse of a sales partnership that rocked global potash markets and landed the Russian company’s chief executive in a Belarusian prison.

The president of Belarus, Alexander Lukashenko, has said the trade fight could only be defused if new owners for the Russian potash miner were found. The bond was issued by a special purpose vehicle owned by Uralkali’s primary shareholder Suleiman Kerimov and his two partners. By converting it to shares, the China Investment Corp.–through its Chengdong Investment Corp. subsidiary–transfers ownership of a sizeable stake of the company out of the Russian partners’ hands.

In addition, Mr. Kerimov is in talks to sell the 21.75 per cent stake he owns through his foundation, and his partners are eager to sell their smaller stakes as well, people close to them say. Together the three men control just over a third of the company. People familiar with the situation say potential buyers include several Russian tycoons, but that there is also interest from investment groups in other Asian countries. They say that Mr. Kerimov is seeking an overall valuation for the company of about $20 billion, which would value his foundation’s stake at $4.35 billion.

The bonds held by CIC had been due in 2014. At the current share price, CIC’s stake is worth about 64.5 billion rubles ($2.03 billion). When it first bought the bond last November, the stake was worth about RUB84.6 billion, although the value and terms of the loan were never disclosed.

Uralkali chief executive Vladislav Baumgertner has been jailed in Belarus since Aug. 26, when he was arrested on charges of abuse of power following the Russian company’s departure from the Belarusian Potash Co., or BPC, its trading partnership with state-run Belaruskali. Belarusian authorities also issued a warrant for Mr. Kerimov’s arrest. Uralkali has dismissed the charges as politically motivated.

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