K+S Takeover Higher Potash Bid Expected

Canadian fertilizer producer PotashCorp is expected to raise its $8.8 billion offer for rival K+S after the German potash and salt producer rejected the offer as too low, analysts said.
Try again, PotashCorp. There's more in this heap than you assumed.

PotashCorp, one of the world’s largest producer of the fertilizer potash based in Canada, kept faith in its takeover K+S after the German rival rejected its €7.9 or $8.8 billion offer.

“PotashCorp (is) confident K+S’ concerns can be addressed through collaborative discussion,” the Canadian firm said in a statement on Thursday.

Hours earlier, the Kassel-based fertilizer and salt producer K+S had rejected the offer as too low.

“Jointly with the Supervisory Board we have come to the conclusion that the proposed price of €41 per share does not adequately reflect the fundamental value of K+S,” Norbert Steiner, K+S’ chief executive said in a statement.

K+S, which is worried about job losses in Germany or abroad after an acquisition, called the offer “unsolicited”, corporate speak for a hostile takeover.

We have not dug ourselves in and we have not gone into defense mode. Norbert Steiner, Chief executive, K+S

Analysts were generally supportive of K+S in its decision to reject the initial offer.

Commerzbank analyst Lutz Grüten said PotashCorp’s offer of €41 per K+S share was too low and a price of up to €55 per share was necessary to make the takeover successful.

Hein Müller, analyst at DZ Bank, was also convinced PotashCorp was very interested in K+S and would increase it offer price.

“They (PotashCorp) now have a point of reference with regards to the price, and know where to improve their case,” Mr. Müller said.

K+S shares fell two percent on Thursday to €37.02 after the company rejected the offer but rose again on Friday morning by more than 4 percent to €38.70 after PotashCorp responded to the rejection.

159 K+S-01 WTB 2014


Mr. Steiner released a statement arguing that PotashCorp's offer did not account for the value added by the Legacy project, a potash mine currently under construction in Canada. He said that the book value alone corresponded to €11 per share and would rise to as much as €21 per share in the future.

As commander-in-chief of the company that is under attack, Mr. Steiner said that if a takeover is inevitable, he wants more money. Based on K+S' last share price before the takeover plans became known, which was €29.05 last Friday, and his own calculations Mr. Steiner would consider a price of over €50 per share reasonable.

The CEO did not name any concrete figures, but it is clear that the price was not his only reason for rejecting the offer.

There is also the issue of jobs. PotashCorp has to date apparently made no binding promises to protect the interests of K+S' workforce of over 14,000 people. Despite repeated inquiries, Mr. Steiner said, the Canadian group has only continued to trot out platitudes.

In Germany alone, Mr. Steiner said that over 30,000 jobs are directly or indirectly linked to domestic production of raw materials and mineral nutrients. This will certainly not be the last word in the battle between these two companies.


Maike Telgheder is an editor at Handelsblatt, covering pharmaceutical and chemical companies. Siegfried Hofmann is Handelsblatt's chemical and pharmaceutical industries correspondent in Frankfurt. Gilbert Kreijger, an editor with Handelsblatt Global Edition, contributed to this article. To contact the authors: [email protected]; [email protected]