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PotashCorp wants to take over Germany's K + S fertilizer group

Last updated: 16:59 26 Jun 2015 EDT, First published: 14:59 26 Jun 2015 EDT

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K + S, which is the world's biggest salt maker, would feel right at home in Saskatchewan, the potash-rich region where it was planning to build the two million tonnes/year Legacy potash mine, and where PotashCorp is based

PotashCorp (TSE.POT) (NYSE:POT), the world’s third largest potash producer, wants to expand and has targeted its German competitor K + S potash and fertilizers group.   

 

PotashCorp "informed K + S’s management and board of its intention to acquire all its shares through a public offering, subject to certain conditions including an audit of its accounts," according to a statement released Thursday evening. 

 

K + S responded issuing a brief statement to the effect that it would review its options and the offer. K + S, based in Kassel, Germany employs 14,000 people worldwide and generates around EUR4 billion in revenue. This is one of the smallest values ​​of the Dax index of the stars securities (blue chips) of the Frankfurt Stock Exchange, with a market capitalization of about 5.5 billion euros. 

 

K + S, which is the world's biggest salt maker, would feel right at home in Saskatchewan, the potash-rich region where it was planning to build the two million tonnes/year Legacy potash mine, and where PotashCorp is based. 

 

K + S produces some seven million tonnes of salt products, including three million tons of potassium chloride, which is used in fertilizer, the rest are special salts. 

 

The market for potash, a key ingredient for the manufacture of fertilizers, has suffered in the past two years, since the Russian giant Uralkali sector ended it participation in the Belarusian/Russian cartel BPC with Belaruskali, which de-facto created an oligopoly, matched in scope by North America’s CANPOTEX, which includes PotashCorp, Mosaic Potash and Agrium. 

The added pressure and the dissolution of BPC have not done much harm to PotashCorp’s stock price. Indeed, shares of PotashCorp (NYSE: POT) have rebounded to the high USD$30’s and low 40’s in 2014, which is exactly what they were on the day before Belaruskali and Uralkali ended the BPC pricing mechanism on July 30, 2013.  

Indeed, PotashCorp hit a 52 week high of C$47.10 on January 30. Rather, what the BPC breakup may have caused is a drive toward consolidation. Hints of this were seen earlier in the spring when Israel Chemicals absorbed Allana Potash, one of the largest junior and closest to production potash projects.

PotashCorp announced a profit of US$370 million in the first quarter, representing a US$30 million increase over last year even though its sales remained flat. 

A lower Canadian dollar has contributed to lower its costs per tonne, maintaining good profit margins despite the lower market price. 

PotashCorp was trading 2.49 percent lower this afternoon at C$38.

 

 

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