DEALTALK-Russia-Belarus potash deal piles pressure on buyers
* Russian potash miner to make bid for Belarus partner
* Deal would create world's biggest potash miner
* Swoop for Belaruskali to pile pressure on buyers
* Uralkali owner's next move a concern for investors
By John Bowker
MOSCOW, June 16 (Reuters) - A tie-up between Russian potash miner Uralkali and its Belarussian trading partner would create the world's biggest producer of the farming agent and pile pressure on buyers including China and India.
The two companies are already among the top four producers of the fertiliser ingredient. Should Uralkali swoop on Belaruskali, as widely predicted, the combination would create an industry leader with 21.1 million tonnes of capacity, leap-frogging Canada's Potash Corp with 12 million.
Sources close to the negotiations have said Uralkali's tycoon owner Suleiman Kerimov, a close ally of Russian Prime Minister Vladimir Putin, has already begun talks about buying a 50 percent plus one share of Belaruskali -- valued by Belarus President Alexander Lukashenko at $15 billion.
Lukashenko had been reluctant to hand over control of what is widely considered to be the country's most valuable asset and cash cow, but a national currency crisis and subsequent bail-out by a Russia-led fund has forced his hand.
Uralkali said last week it was "considering .. a transaction" and had in the meantime loaned Belaruskali $1 billion.
The industry consolidation will strengthen the hand of producers who set global prices at a time when demand for potash is rising sharply.
Countries are anxious to safeguard supplies of the fertiliser ingredient as the world battles food shortages and grows biofuels for energy supplies.
Potash prices are expected to rise to $600 a tonne by 2012 from a spot price of $510-540 now, according to analysts at Troika Dialog.
"Adding Belaruskali (to Uralkali) will move the industry further towards a global oligopoly -- a market controlled by just two or three big players -- and there is no regulation against that," said Jack Arnoff, director of fund manager Elbrus Capital Partners and a Uralkali shareholder.
Potash consumer China, which takes up to 20-30 percent of Uralkali-Belaruskali's exports, was interested in taking a stake in Belaruskali to exercise some control over prices, Interfax reported last month, but the talks failed.
"Belarus could have sold a minor stake to China or India which could have impacted prices. Uralkali can take out that risk by buying the company (Belaruskali)," Uralsib analyst Anna Kupriyanova told Reuters.
The world's biggest diversified miner BHP Billiton tried to gatecrash the tightly controlled sector with a $39 billion bid for Potash Corp last year, but the deal collapsed amid pressure from Canadian authorities. ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
World's biggest potash producers - r.reuters.com/suh22s ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Lukashenko's price tag would value Belaruskali at around $3000 per tonne of capacity, according to calculations by Citi analyst Daniel Yakub, compared to Uralkali's $2706 a tonne.
Both companies are partners in export vehicle Belarussian Potash Co (BPC), so the move would primarily add scale and influence to the Russian business as opposed to venturing into territory owned by competitors such as Potash Corp.
Yakub added that a compromise would have to be reached on export duties charged to Belaruskali, which could increase the valuation. Uralkali does not have to pay export duties.
One risk for investors is Kerimov himself -- Russia's 19th-richest man according to Forbes and also the co-owner of Polyus Gold, which is up for sale.
Analysts said he is known as a financial investor and will want to exit the potash business at a point yet unknown, lending uncertainty to the company's growth plans.
"Kerimov is likely to be even more incentivised to monetise his holdings given his increasing leverage," said Mikhail Stiskin at Troika, although he added that while Kerimov remains a shareholder Uralkali is guaranteed to pay generous dividends.
Elbrus Capital's Arnoff agreed Kermimov's plans were unknown.
"There may be an issue with how Kerimov will behave, but I don't expect any particular abuses," he said. (Additional reporting by Alfred Kueppers in Moscow and Euan Rocha in Toronto, editing by Sophie Walker)
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