Potash Corporation of Saskatchewan is weighing a buyout of all shares of Germany’s K+S through a public takeover offer, the Kassel-based minerals specialist confirmed in an ad hoc statement on Jun. 25.
The confirmation followed the pre-release of a report in the German business newspaper Handelsblatt, which quoted “financial circles” as saying Potash may offer €40 per share, valuing K+S at €7 billion.
K+S said it was informed that the Canadian potash giant “may decide, depending on certain conditions, including a due diligence exercise” to make the offer to its shareholders.
While management of the German company, Europe’s largest potash supplier, said it is “currently assessing the available options,” it added that “this process is still ongoing.”
According to news agency reports, shares in K+S have risen 27% since the beginning of 2015, valuing the company at €5.6 billion. Potash, whose shares also are said to have surged in recent weeks, has a market capitalization of $32 billion.
Acquiring K+S would give Potash Corp. a greater presence in Europe through the access to its potash and salt mines in Germany. It would also give the Canadian company control of K+S’s new Legacy potash mine in Saskatchewan, scheduled to begin production in mid-2016 and expected to reach 2 million t/y of capacity by the end of 2017.
Legacy will be the first new greenfield potash mine built in Saskatchewan in almost 40 years, Potash Corp. already has five potash mines in the Canadian province.
In May of this year, K+S raised its forecast for full-year revenue after a strong first quarter and on the back of an expected rise in prices for potash and salt as the industry recovers from a ramp-up in production following the breakup of a Russia-Belarus industry cartel in mid-2013.
Both Reuters and Bloomberg have quoted sources as saying K+S is likely to reject the takeover offer as too low, as the value of the company’s Legacy mine is not yet reflected in its share price.
“The strategy for Potash is to take capacity out of the market to increase its own returns,” a Reuters Canada source said, adding that K+S would likely see its relatively high-cost German salt and potash mines closed after such a deal.