Canada’s Potash approaches German rival – by James Wilson (Financial Times – June 25, 2015)

London – The world’s largest potash producer has approached a rival about a possible takeover worth at least $7bn, a step that would be one of the largest transactions in the mining industry during the commodity price downturn of recent years.

PotashCorp of Saskatchewan, the Canadian miner of the fertiliser ingredient, said it had made a friendly “private proposal” to K+S, a German producer of the same commodity.

K+S was currently assessing its options after being told by PotashCorp of a possible takeover offer, the German company said in a statement. A PotashCorp statement said: “There is no certainty that any offer will ultimately be made or as to the terms on which such an offer might be made.”

Shares in K+S rose more than 30 per cent to €37.38. Shares in PotashCorp rose 4.3 per cent in Toronto to C$39.33. News of the approach was first reported by Handelsblatt.

Potash is a key ingredient in fertilisers and the market has been in a state of flux since 2013, when a Russian and a Byelorussian producer broke a longstanding partnership agreement that was aimed at supporting prices rather than a specific level of output.

Since then prices for potash have been at five-year lows and most producers are operating below capacity.
Potash sales have for years been dominated by the Russian-led partnership and by a similar North American sales group led by PotashCorp. K+S, a member of Germany’s blue-chip Dax index with a market capitalisation of about €6.2bn ($7bn), and Israel’s ICL are the other main producers.

Potash demand is strongly correlated with economic growth.

BHP Billiton, the world’s largest miner by market capitalisation, is investing in its own potash project in Canada, a move that could bring further disruption to the market since the Anglo-Australian miner would be extremely unlikely to collaborate with rivals on maintaining price and output.

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