Germany’s K+S spurns $8.8-bn takeover offer from Canada’s PotashCorp
03 Jul 2015
German salts and chemicals giant K+S AG has rejected a €8-billion ($8.8 billion) takeover attempt from Canadian rival Potash Corp of Saskatchewan (PotashCorp), the world's biggest potash producer.
K+S said the proposal undervalued the company and its prestigious green field Legacy Project in Canada.
''The proposed transaction does not reflect the fundamental value of K+S, and is not in the best interest of the company,'' K+S said in a statement yesterday.
''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,'' CEO Norbert Steiner said.
''Not only does this proposal undervalue our potash and magnesium products and our salt business, it completely disregards the value of our legacy project,'' he further stressed.
Saskatoon-based PotashCorp had submitted its proposal to buy K+S, Europe's largest supplier of potash and the world's largest salt producer, earlier this week. (See: Canadian mining giant Potash Corp to buy German rival K+S AG for nearly €8 billion)
K+S' book value is €11 per share and considering future earnings it is estimated at €21 per share.
''This is not reflected in the share price,'' Steiner said.
K+S has already invested €2 billion in its legacy project which is the first greenfield project in the potash industry in almost four decades. The project is on schedule and is expected to be commissioned by the end of 2016, with positive cash flows anticipated from the next year onwards.
''We believe PotashCorp is trying to take advantage of the valuation gap to take over K+S and gain control over Legacy,'' Steiner said.
K+S board believes that the deal is not in the best interest of the company or its over 14,000 employees worldwide.
''Despite repeated requests to address this question, PotashCorp's answers have remained vague,'' Steiner said.
In Germany alone there are more than 30,000 direct and indirect jobs associated with the domestic raw material production and mining of mineral nutrients by K+S, according to the company.
Moreover, the board does not believe that the Canadian giant has a sustained interest in continuing K+S' fertilizer and salt business in its current form.
K+S' outlook remains strong driven by its ongoing strategic initiatives. The group expects its earnings before interest, tax, depreciation and amortisation to increase to €1.6 billion by 2020 through cost savings and contribution from its Legacy project.
''We are strong in potash and we are strong in salt. There is one positive effect on PotashCorp's proposal: It is crystallising event for fundamental re-rating of K+S,'' Steiner said.
Prices for potash have fallen about 36 per cent from their 2011 high of around $480 a tonne to $307 a tonne due to supply glut from Canadian potash exporters (Canpotex) and rival Russian-Belorussian cartel OAO Uralkali.