Chinese regulators are considering an investigation into BHP Billiton's proposed $40bn (£26bn) takeover of Potash Corporation of Saskatchewan.
According to local media reports, the Chinese monopolies watchdog is weighing up inquiries into both BHP's takeover bid and into the proposed merger between two Russian potash suppliers, Uralkali and Silvinit.
If a monopoly investigation goes ahead, it is not clear how much influence Chinese watchdogs could bring to bear on the BHP deal. The Anglo-Australian company is set to make a series of regulatory filings in relation to the proposed takeover, but the focus is on the US and Canada, where PotashCorp is based and where it sells more than a third of its output.
PotashCorp produces around 20 per cent of the world's potash, although only about 7 per cent of its output is sold in China. But Chinese law sets a ceiling on revenues within the country, beyond which foreign mergers may require approval. A tie-up between BHP and PotashCorp could be above this threshold.
Although BHP has potash assets in Canada that it could develop in the future, it is likely to try to counter any investigation by the Chinese on the grounds that it does not currently produce potash or compete with PotashCorp in any markets.
China has been watching closely since BHP launched a $130-per-share offer for PotashCorp that swiftly turned hostile after the target's management derided it as "grossly inadequate". It is the world's second-biggest importer of potash, which is used to make fertiliser, and buys nearly half of its requirement from abroad. The Middle Kingdom's sovereign wealth fund and the state-owned fertiliser company, Sinofert, were both tipped as possible white-knight bidders to help push up the share price towards the $150-plus that PotashCorp is thought to want.
Although the PotashCorp chief executive, Bill Doyle, said "all sorts of different players" had contacted the company in the week after it rejected BHP, so far no rival bidders have come to the table. Some, such as the Brazilian mining giant Vale, have actively distanced themselves from rumours of putative moves on PotashCorp.
But Sinochem, Sinofert's parent company and China's biggest fertiliser trader, has neither ruled itself in or out. Feng Zhibin, a vice-president of Sinochem, said last week that his company was "closely watching" the fracas between BHP and Potash. The group has also confirmed that it is "interested in overseas potash investment opportunities".
Meanwhile, the row between BHP and PotashCorp mnoved up a gear earlier this week when PotashCorp's sales director, Stephen Dowdle, described BHP's "cold calls" to PotashCorp shareholders as "highly unethical" behaviour designed to "sow seeds of doubt and confusion about the future" of the company.
BHP's unchanged $130-per-share offer represents a 16 per cent premium to PotashCorp's share price on the day before the offer was made. Since then, the fertiliser group's stock has shot up by 31 per cent to more than $147, indicating a widespread assumption in the market that the FTSE 100-listed miner will raise its offer.
The BHP chief executive, Marius Kloppers, has not ruled out increasing his offer. But last week, as he unveiled results which showed that its second-half profits were up 47 per cent, he stressed that BHP would remain "disciplined" about the bid. "The shareholders own the company and it is my job to create more value for them, not to do any one thing at any cost," he said.