K+S shares surge after Potash takeover approach

Shares in German potash miner K+S leapt almost 40 per cent yesterday after a takeover proposal from Canada's Potash which sources said was worth close to €8 billion.

K+S, which would become the first German blue-chip firm in a decade to be bought by a foreign company, said it was assessing its options after announcing the approach late Thursday.

Two sources close to the matter said K+S would likely reject the proposal as too low. K+S believes Potash wants to take capacity out of an over-supplied market to boost its profitability, the sources said, adding the Canadian firm might also look to close some of K+S’s high cost German mines and sell its salt business.

Potash is operating well below full capacity because of weak prices for potash, which is mostly used in fertilisers.

One of the sources said Potash Corp proposed to pay €41 a share, a 41 per cent premium to K+S’s closing price on Thursday and 43 per cent above the weighted six-month moving average price. K+S is the world’s fourth-largest potash maker, trailing the North American export pact Canpotex made up of Potash, Mosaic and Agrium, Uralkali and Belaruskali.

A deal with Potash would be the first big merger in the global potash market since Uralkali bought Silvinit in 2011.

Potash’s bid is the latest move by a North American company on a European rival, as US and Canadian firms take advantage of low interest rates and a weak euro to pursue new growth opportunities.

Bernstein analysts said Potash was probably particularly attracted by the Legacy potash mine which K+S is constructing in Canada.

Others, however, questioned the proposal’s rationale and said it would likely face stiff resistance.

The proposal is Potash Corp’s second tilt at K+S. A bid to acquire a majority stake in 1997 was blocked by Germany’s competition watchdog.

Reuters