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In Potash Corp. of Saskatchewan Inc.’s quest to buy K+S AG, one of its biggest hurdles may lie in the German company’s corporate structure.
K+S has two boards of directors, one comprised of executives and another of employee representatives and shareholders.
The employee-shareholder group, known as the supervisory board, has enormous influence over the company with the power to hire and fire executives.
Unlike most takeovers, where a high enough bid will succeed, the buyer must also deal with the supervisory board, which takes into account the employees.
“The representative of the employees represent different interests,” said Martin Imhof, a partner at law firm Heuking Kuhn Luer Wojtek, who specializes in cross-border mergers and acquisitions in Germany.
“They try to protect employees, so no employee is made redundant in a takeover.”
Half of the directors on K+S’s 16-member supervisory board are employee representatives and union reps. It voted unanimously along with the executive board to reject Potash Corp.’s $8.7-billion (U.S.) bid, saying it was too low and citing potential job and production losses.
Potash Corp.’s offer represents a 57 per cent premium over K+S’s stock over the past year – a significant amount, especially in a soft commodities market.
But even though Potash Corp. is open to raising its bid if it found more value, that may not be the sticking point.
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