China Blue taps biggest rival for IPO

Top nitrogen fertilizer maker Yara targets at least 10pc of US$400m offering to expand in mainland

China Blue Chemical, a fertilizer unit of China National Offshore Oil Corp, has agreed to allow the world's largest nitrogen fertilizer company buy at least 10 per cent of its up to US$400 million initial public offering, market sources said.

China Blue will gain access to valuable technology from the tie-up with Norway's Yara International which in turn can tap into the mainland's US$17 billion fertilizer industry, the largest in the world. 'They were convinced of the need to [bring in high-profile investors],' said a person familiar with the situation.

The two companies planned to attempt a rollup of the mainland fertilizer industry by co-investing in small to medium-sized mainland nitrogen-based fertilizer companies to gain market share, sources said.

Nitrogen fertilizers such as ammonia and urea are used to grow almost half of the world's food. Asian demand for fertilizer, along with most other resources, has pushed up prices. That has offset rising production costs at fertilizer companies caused by higher fuel prices.

Yara would like to take 30 per cent to 40 per cent of the offering, sources said. A final decision on the size will be made at the time of the share sale, expected next month.

China Blue will sell an additional 25 per cent of the new shares to four Hong Kong tycoons, including Hutchison Whampoa chairman Li Ka-shing and Henderson Land Development chairman Lee Shau-kee. Such investors tend to stabilise the share price after the stock starts trading as they usually agree not to sell their stakes for a set period of time. They would also attract other investors who feel more comfortable snapping up the shares when well-known investors are involved.