Confirms rejection of Potash offer at €41/shr
Following a thorough review of all aspects and considering the overall circumstances, the Board of Executive Directors and the Supervisory Board of K+S Aktiengesellschaft today have decided to reject the unsolicited proposal of Potash Corporation of Saskatchewan Inc. to acquire all outstanding shares of K+S Aktiengesellschaft for 41 Euro per share. The proposed transaction does not reflect the fundamental value of K+S and is not in the best interest of the company.
CEO: Jointly with the Supervisory Board we have come to the conclusion that the proposed price of 41 Euro per share does not adequately reflect the fundamental value of K+S. Not only does this proposal undervalue our potash and magnesium products and our salt business, it completely disregards the value of our Legacy Project. The book value alone represents 11 Euro per share; considering future earnings we calculate a value of up to 21 Euro per share. This is not yet reflected in the share price. We believe PotashCorp is trying to take advantage of the valuation gap to take over K+S and gain control over Legacy.
Legacy is the first greenfield project in the potash industry in almost 40 years. K+S has already invested more than 2 billion Euro in the project which is on time and on budget. The first tonnes of potash will be produced by the end of 2016 and positive cash flows will be generated already from 2017 onwards.
K+S strong outlook is also driven by ongoing strategic initiatives across both the potash and magnesium and salt business units. The Salt 2020 strategy alone is expected to produce a sustainable increase in operating profit of up to 250 million Euro. Furthermore, the Fit for the Future efficiency program is expected to deliver cumulative cost savings of more than 500 million Euro by the end of 2016.
Overall, K+S expects to see Group EBITDA to increase to 1.6 billion Euro by 2020 with the Legacy Project contributing on average annual operating cash flow growth of more than 10% up to this point.
Since the Boards continue to remain committed to its dividend policy of a pay out of between 40-50% of its adjusted operating income after taxes, shareholders can look forward to an attractive dividend yield in the coming years.
