K+S investors see Potash Corp deal within reach despite rebu – by Andreas Kröner and Ludwig Burger (Reuters Canada – July 9, 2015)


FRANKFURT (Reuters) – Shareholders in takeover target K+S say a deal could be done because suitor Potash Corp’s main aim is to get control over its German rival’s ambitious Canadian project and scale it back.

K+S’s “Legacy” mine in the prairies in western Canada would be the first built from scratch in the global potash industry in almost 40 years. It would add to an already oversupplied market where demand is suffering from weak emerging market currencies and low crop prices.

Potash Corp could more easily ration global supply by controlling K+S, but still commit to leaving its German operations largely intact. The potential threat to K+S’s domestic operations were seen as one reason why German regulators might block a deal.

K+S last week rebuffed Potash Corp’s 7.9 billion euro ($8.6 billion) proposed bid of 41 euros per share as too low and suggested the suitor was planning to shrink the company.

Potash is in demand as a mineral because it plays a vital role in plant growth and crop resistance to cold and drought. Representing a market of about $20 billion, it is one of three main nutrients used in synthetic fertilisers, alongside nitrogen and phosphorus.

K+S shares traded at 36.58 euros on Thursday and some investors and analysts say it is poorly placed to reach a market value of 41 euros per share under its own steam.

Suitor Potash should be able to squeeze more value from K+S. According to J.P. Morgan, the German company has an 11 percent market share, plus potentially about 3 percent from its new Canadian mine.

Potash Corp previously committed funds to boost its annual capacity to more than 17 million tonnes over the next few years from almost 11 million tonnes in 2015.

It is now reining in production amid a boost in supply from major rivals Uralkali and Belaruskali, who stopped collaborating two years ago.

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