K+S peers have rationale to consider rival bid to Potash Corp - bankers
Global potash and fertiliser companies could have rationale to consider rival bids to Potash Corp’s [TSE:POT] move for K+S Aktiengesellschaft [ETR:SDF], two sector bankers said.
K+S’ announcement that Potash is considering a bid does not come as a surprise, the bankers said. A number of industry players have been looking at K+S, which is thought to have been on the market for “some time”, one said.
Interest could come from several industry players, the bankers said. North American firms, Agrium [TSE:AGU], Mosaic [NYSE:MOS] and CF Industries [NYSE:CF], Norway’s Yara International [STO:YARO], Russia’s Phosagro [MCX:PHOR] and potentially China’s ChemChina, could consider it, the first banker said.
For the North American firms and ChemChina, K+S would provide a platform to get a European footprint, the first banker said. For Mosaic, the deal would follow on from its expansion in South America, where it bought Archer Daniels Midland’s [NYSE:ADM] fertiliser distribution business in Brazil and Paraguay last year.
Yara is known for looking at large transformational deals, the first banker said. Its talks to merge with CF to create the world’s largest maker of nitrogen-based fertiliser fell through last year, he noted.
Potash has a strategy to build supply and capacity outside its native Canada, a sector analyst said. It could have an eye on K+S’ Legacy project in Canada, the analyst said. Potash should be able to significantly lower the capex of Legacy due to its existing infrastructure, he said.
Potash Corp is the world’s third biggest potash producer by sales volume behind Uralkali [MCX:URKA] and Belaruskali, whilst K+S is the seventh biggest, according to a Uralkali presentation based on 2014 figures.
Potash and K+S would have combined annual sales volume of 13.9m tonnes, leapfrogging Uralkali (12.3m tonnes) and Belaruskali (10.2m tonnes) to become the biggest producer by sales volume, based on the presentation.
Potash, Agrium and Mosaic export their potash through a marketing organisation, Canpotex. Uralkali and Belaruskali had a similar arrangement to sell through the Belarusian Potash Company until 2013, when a dispute between the two ended their arrangement.
Reports have suggested Potash Corp could offer K+S shareholders EUR 40 per share. K+S was trading at EUR 29 per share before the rumours. It closed Friday up 29.6% at EUR 37.65, giving a market capitalisation of EUR 7.21bn.