UPDATE: K+S Buys Morton Salt, Shares Jump In Approval

Shares in K+S AG's (SDF.XE) jumped Thursday after the specialty and standard fertilizers supplier said it bought U.S.-based Morton Salt, a move that makes K+S the world's biggest salt producer and caps months of speculation about its expansion strategy.

K+S plans to leverage Morton's familiar "umbrella girl" brand to expand its salt business in North America and at the same time save on distribution costs between Brazil, Chile and North America. It expects the $1.68 billion deal will be accretive to earnings beginning in 2010.

Investors bought K+S shares after the news and at 1028 GMT K+S stock was up 11% at EUR38.55, outperforming a higher Frankfurt market.

The German company has said repeatedly it was in the market for salt or fertilizer businesses, having come off a year of record high fertilizer prices.

Last month, K+S reportedly shelved a $2.4 billion bid for U.S.-based Compass Minerals International Inc. (CMP) after Compass shares soared and made the deal too expensive. K+S has declined to comment on whether it was planning a formal bid.

Analysts had voiced concern K+S might overpay for Morton Salt after Dow Chemical Co. (DOW) said it had received several bids topping $1.5 billion. Dow was required to divest Morton Salt as part of its deal to buy its parent Rohm & Haas Co. (ROH)

Most agreed Thursday that Morton's $1.68 billion price tag is fair.

With 2008 sales of $1.2 billion and earnings before interest, taxes, depreciation and amortization, or Ebitda, of $270 million, Morton Salt looks cheap, said analyst Heino Ruland of Ruland Research in Frankfurt.

"K+S benefited from a buyer's market," he said.

Commerzbank noted that Morton offers a high margin business that will increase K+S' salt capacity by 78% and more than double its salt sales.

"While the acquisition is a slight deviation from the pure potash character of K+S, we believe the positive aspects outweigh," Commerzbank analyst Stephan Kippe wrote in a note.

K+S Chief Executive Norbert Steiner told journalists Thursday that the company doesn't plan any other major acquisitions in the salt business.

He also said K+S isn't planning any takeovers in the potash business, and that it will continue examining greenfield projects instead.

SNS Securities said K+S has now probably ruled out a bid for the fertilizer division of Dutch chemicals company Koninklijke DSM NV (DSM.AE), as had been widely speculated.

The potash industry has been rife with acquisition rumors, fueled by a hostile bid by CF Industries Holdings Inc. (CF) for Terra Industries Inc. (TRA), which was followed by Agrium Inc.'s (AGU) hostile bid for CF.

WestLB analyst Wolfgang Fickus said K+S is now an unlikely takeover target itself due to the increased debt load from the Morton acquisition.

The cash deal for Morton is underwritten by Dresdner Kleinwort, Societe Generale and UniCredit. It is still subject to antitrust approval but is expected to close in mid-2009.

Company Web Site: www.k-plus-s.com

-By Allison Connolly, Dow Jones Newswires; [phone]; [e-mail]