PotashCorp abandons $15-billion takeover of Israel Chemicals

Potash Corporation of Saskatchewan (PotashCorp), the world's largest fertilizer producer, today abandoned its $15-billion plan of acquiring Israel Chemicals Ltd (ICL), after Israeli lawmakers opposed the deal.

"While we continue to believe that such a transaction would be of tremendous benefit to stakeholders of both companies and the State of Israel, there must be receptivity to foreign investment and certainty in the rules that govern such investment," the Saskatchewan-based company said in its Q1 earnings statement.

 "We have therefore concluded that now is not the time to pursue this opportunity and will focus our energies on other options to maximize shareholder value."

Reacting to PotashCorp's announcement, ICL said "In the potash market, ICL is a medium size, low cost producer and by no means dependent on other players in the market."

In November 2012,  ICL's biggest shareholder Israel Corp, controlled by the country's billionaire Ofer family, had said in a regulatory filing with the Tel Aviv Stock Exchange that PotashCorp CEO Bill Doyle met with Israeli Prime Minister Benjamin Netanyahu and other government officials with plans of ICL formally merging with PotashCorp.

The move from PotashCorp came nearly three months after it dropped plans of increasing its stake in ICL from 13.85 per cent to as much as 25 per cent as the Israel government indefinitely delayed giving antitrust clearance.

PotashCorp had submitted its application in December 2011 to Israel's ministry of finance to raise its stake, but the ministry as well as the Israeli regulator Noa Zvi refused to act on the proposal.

Since buying the stake in 1998 and becoming the second-largest shareholder, PotashCorp has been trying to buy the rest of ICL only to see its plans thwarted by the Israeli government, which holds a ''golden share'' in the Tel-Aviv-based company.

Although the Israeli government does not physically hold any shares in the company, it can overrule other shareholders' decisions under certain circumstances, since it has given ICL exclusive rights to mine in the Dead Sea and the Negev Desert.

ICL is the world's sixth-largest producer of potash with an 11 per cent global market share, and is one of Israel's largest companies.

ICL is a major producer of potash, compound potash and phosphate fertilizers, food grade phosphoric acid, elemental bromine, magnesium and a major player in specialty chemical high margin niche markets.

It also owns and operates underground mines in Spain, the UK, the US, China and South America.

ICL's major shareholders are Israel Corp with 52.30 per cent stake, PotashCorp Agricultural Society Ltd, a unit of PotashCorp with 13.85 per cent, and institutions and public hold the remaining 33.85 per cent.

Among the significant institutional shareholder is Capital Research and Management Co, a division of the US mutual fund management firm The Capital Group.

Nearly 60 per cent of the world's potash supply is in the hands of Canpotex, a North American cartel jointly owned by PotashCorp, Calgary-based Agrium, a leading global producer of fertilisers, Mosaic Canada Crop Nutrition, a subsidiary of the US phosphate, and potash giant The Mosaic Company.

Potash Corp supplies Canpotex with 53.6 per cent of its potash, while the remaining goes to Mosaic (37.1 per cent) and Agrium (9.3 per cent). Canpotex's major markets include Australia, Brazil, China, India, Indonesia, Japan, Korea and Malaysia, with annual shipments in the range of 8-9 million tonnes.

The other cartel is Belarus Potash Company, the marketing company for Russia's Uralkali and Belarus-based Belaruskali. Belaruskali, Uralkali, Silvinit are the world's third, fifth and sixth-largest potash fertiliser producers, respectively.

The other smaller fertilizer company is Germany's independent firm K+S, Europe's largest supplier of potash.

PotashCorp is the world's largest fertiliser company by capacity, and a leading supplier to the global agriculture, animal nutrition and industrial chemicals market.

The company holds 22 per cent of the world's potash production capacity, 2 per cent of nitrogen production capacity and 6 per cent of phosphate supply.

It is one of Canada's most valuable companies with a market capitalisation of around $34.3 billion and annual revenues of $7.4 billion.

In 2010, PotashCorp had rejected a $38.6-billion cash takeover bid by BHP Billiton, the world's largest mining company. The Canadian government also blocked the deal on the ground that PotashCorp is a strategic resource company.

The takeover of ICL would only strengthen PotashCorp's dominance in the global fertilizer market, and would hurt countries like India and China, which are main buyers from ICl of this critical commodity.