TORONTO (miningweekly.com) – The world’s largest potash miner Potash Corporation of Saskatchewan (PotashCorp) on Monday retracted its offer to buy German rival K+S Aktiengesellschaft, citing declining macroeconomic conditions and a lack of interest from K+S management to pursue a deal.
K+S had previously rejected the unsolicited offer of €41 a K+S share, saying the proposal, valued at €7.9-billion, did not adequately reflect the fundamental value of K+S’s potash and magnesium products and salt business, and completely disregarded the value of the Legacy project.
The C$4.1-billion Legacy project, near Bethune, Saskatchewan, would be the first new potash mine built in Saskatchewan in nearly 40 years and was expected to produce up to two-million tonnes of crop nutrient by the end of 2017. K+S had already invested more than €2-billion in the project, which was on time and within budget. The first tonnes of potash were expected from the mine by the end of 2016, with positive cash flows generated from 2017 onwards.
K+S had also raised concerns about whether PotashCorp had any sustained interest in continuing the German fertiliser and salt businesses in their current forms, saying there were no firm commitments in place to protect the interests of the more than 14 000 employees of K+S worldwide.
Saskatoon, Saskatchewan-based PotashCorp’s offer represented a 59% premium to the volume weighted average of K+S’s share price during the previous 12 months and, according to PotashCorp, included comprehensive, credible commitments to K+S’s employees, unions and communities.
“Our proposal reflected full and fair value, and was predicated on a collaborative process with access to customary due diligence. Since that time, challenging macroeconomic conditions have contributed to a significant decline of global commodity and equity markets, with potash peer stocks down almost 40% [based on its peer-group average including The Mosaic Company, Israel Chemicals and Intrepid Potash, and excluding PJSC Uralkali, given its expected delisting from exchanges],” PotashCorp president and CEO Jochen Tilk stated on Monday.
“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 interest of our shareholders,” he said.