China gets stake in Russian potash giant
A source familiar with the bond exchange said it was triggered when Uralkali's market value fell below $20 billion, while no cash changed hands in the deal. Chengdong Investment Corp, a subsidiary of CIC, bought the exchangeable bonds from Wadge last November.
Uralkali's equity market value is now $16.4 billion, valuing the 12.5 percent stake at around $2 billion.
The transaction could seek to set a benchmark for a broader change of ownership in a Kremlin-blessed deal that would bring in one or more strategic buyers.
"It is a company that could be bought by a huge number of Russian and foreign investors," First Deputy Prime Minister Igor Shuvalov told Reuters on Monday.
Shuvalov sought to quash speculation that a Russian state business might buy into Uralkali: "There is no sense for the Russian government to take on the risks (of ownership) itself," he said at the Reuters Russia Investment Summit.
While Kerimov's foundation owns 21.75 percent of Uralkali, his partners, Filaret Galtchev and Anatoly Skurov, own 7 percent and 4.8 percent, respectively.
China has in recent years increased efforts to secure its needs for natural resources, in one case lending $25 billion to Russia's state oil major Rosneft and pipeline monopoly Transneft secured against long-term oil supplies.
The stake in Uralkali would, however, mark an exceptional direct investment into a large producing company.
China, which holds $3.5 trillion in foreign reserves, recently agreed to buy 3 million hectares (7.4 million acres) of Ukrainian farmland, which would make Ukraine China's largest overseas farming centre as it strives to meet rising food demand.
The deal with Uralkali could strengthen the Chinese position in negotiations with other producers. China imports around 6 million tonnes of potash a year, more than 10 percent of global demand, and the Chinese potash price is considered the global benchmark.
Potash prices nosedived after the split between Uralkali and Belaruskali in July, though many buyers continue to wait on the sidelines as they expect further price decreases.
The joint venture - Belarusian Potash Co (BPC) - controlled some 70 percent of the market together with Canpotex, a rival North American alliance. Canpotex held in September negotiations with Chinese buyers on new supply contracts.
The deal could give Uralkali an upper hand in selling potash in the Chinese market ahead of Canpotex, said an official at Rashtriya Chemicals and Fertilizers Ltd , a leading state-run Indian fertilizer company.
The deal is unlikely to affect Indian supplies, said the official, who declined to be identified. India is the world's second-largest potash consumer.