Potash Corp. withdraws US$8.7 billion takeover offer for German rival K+S

CALGARY – Potash Corp. of Saskatchewan has withdrawn its US$8.7-billion takeover offer for salt and potash producer K+S AG, citing worsened market conditions and a lack of co-operation from the German company.

K+S had rejected the offer of 41 euros per share, first made at the end of May, as failing to reflect its fundamental value.

Potash Corp said that since making the offer the potash market had worsened and the average stock price of its potash peers had fallen 40 per cent.

“In light of these market conditions and a lack of engagement by K+S management, we have concluded that continued pursuit of a combination is no longer in the best interests of our shareholders,” said Potash Corp. president and CEO Jochen Tilk.

K+S board chairman Norbert Steiner reiterated his contention that the offer price had not reflected the company’s value and that the takeover presented a risk to jobs and potash production in Germany.

Steiner said the company will move ahead with its Legacy potash project in Saskatchewan, which it expects to commission next summer, and will also advance its salt business.

BMO Capital Markets analyst Joel Jackson said in a note that the move came as no surprise since he had assumed the hurdles to get K+S would be too high. But given Potash Corp’s strong desire to make a deal with K+S for market influence and potash price support, another offer could be made in the future.

“This deal could revive down the road and this could be one more act of gamesmanship. But we still believe the regulatory (issues) will always be challenging,” said Jackson.

Altacorp Capital analyst Peter Prattas said the downward push on potash prices meant it would have been tougher for Potash Corp to finance the deal, but a transaction with K+S closer to 30 euros a share might be conceivable.

Potash prices have been under pressure this year as lower crop prices weigh on demand, while potash supplies have increased.

In response to the price pressure, Mosaic Co. announced in September it would cut back production at its Colonsay potash mine in Saskatchewan.

Potash Corp’s share price was up 1.4 per cent in midday trading on the news, while K+S shares were down 25 per cent.

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