Germany's K+S Rebuffs Potash Takeover -- Update

By Sarah Sloat 

FRANKFURT--German salt and fertilizer company K+S AG on Thursday rejected a takeover approach valued at EUR7.85 billion ($8.75 billion) by Canadian rival Potash Corp. of Saskatchewan.

K+S said the proposal undervalued its products and projects, and could compromise jobs and strategy, but analysts believe the company may be open to a sweetened offer.

"The proposed transaction does not reflect the fundamental value of K+S, and is not in the best interest of the company," K+S said in a statement.

The company, owner of Morton Salt, was widely expected to rebuff the bid from Potash, whose offer equated to EUR41 a share.

In a statement early Friday, Potash said it was confident the German company's concerns can be addressed through collaborative discussion.

"We are seeking to meet with K+S management at the earliest possible opportunity so that we can jointly discuss our commitments and further specify the details that would form the basis of a successful combination," Potash CEO Jochen Tilk said.

The Canadian company affirmed that its proposal isn't predicated on closing mines, curtailing production, selling the salt business or cutting jobs.

Both companies mine potash, a fertilizer, and a tie-up would create a giant that could control as much as 30% of the global market.

K+S said its Saskatchewan, Canada mine, being developed in a project known as Legacy, will make it the only potash producer with its own large production facilities on two continents.

The company claimed the book value of the Legacy project alone "represents EUR11 per share; considering future earnings we calculate a value of up to EUR21 per share." It added that this isn't yet reflected in the share price. K+S's shares traded around EUR29 before Potash's bid became public.

"We believe Potash Corp. is trying to take advantage of the valuation gap to take over K+S and gain control over Legacy," said K+S Chief Executive Norbert Steiner, who emphasized his company's desire to remain independent.

K+S also suggested Potash has been "vague" in its commitment to protect employees, and hasn't demonstrated "a sustained interest in continuing the fertilizer and salt businesses in their current form, which are strategically, technically and economically intertwined."

Since the proposal was made last week, analysts have said they consider a price of between EUR45 and EUR55 a share to be reasonable. At the upper end, Commerzbank AG analysts said there would be upside to EUR55 per share in a takeover scenario, in view of the Legacy project and enhanced pricing power and potential synergies that would benefit Potash.

"K+S have left the door open, implying they would accept a bid of EUR50 per share," analysts at Bernstein said Thursday.

In a conference call, K+S Finance Chief Burkhard Lohr declined to specify what might be an adequate offer. Potash's proposal was informal, he said, and any official bid would be put to shareholders, who would decide what price is fair.

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