Futures & Commodities

Potash Corp withdraws offer for German peer K+S amid weakening China demand

Potash drops K+S bid

Potash Corp of Saskatchewan said it had withdrawn its 7.9 billion euro ($8.9 billion) offer for German potash producer K+S, citing a decline in global commodity and equity markets and a lack of engagement by K+S management.

The acquisition would have given Potash Corp an opportunity to realize savings from selling potash within North America from its own Western Canada mines jointly with potash from K+S's Legacy mine, which is under construction in the region.

But senior K+S executives dismissed Potash Corp's bid as too low and refused to negotiate. Since Potash Corp made its offer to K+S privately at the end of May, shares of K+S peers have dropped around 40 percent amid concerns over weakening demand from China, the world's largest consumer of potash.

A worker prepares a railcar to transport potash from the Potash of Saskatchewan Lanigan mine in Lanigan, Sasketchewan, Canada.
Geoff Howe | Bloomberg | Getty Images

"In light of these (challenging) 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," Potash Corp Chief Executive Jochen Tilk said in a statement early on Monday.

Potash Corp had offered K+S 41 euros per share in cash. This reflected a 59 percent premium to the volume-weighted average of K+S's share price during the prior 12 months. K+S shares ended trading on Friday at 31.34 euros.

Potash Corp had no problem financing the offer despite debt markets becoming pricier, according to people familiar with matter who asked not to be identified as the matter remained confidential. Potash Corp now plans to focus on its growth strategy, the people added.

A worker prepares a railcar to transport potash from the Potash of Saskatchewan Lanigan mine in Lanigan, Sasketchewan, Canada.
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Tilk said on Sept. 16 that Potash was not actively discussing its takeover proposal with K+S but remained interested in a combination of the fertilizer producers that would aid North American potash sales and offer new access to Europe. [ID:nL1N11M19J]

K+S had voiced fears that Potash Corp could dismantle the company and eliminate jobs, and that its pledges to the contrary were too vague. Potash Corp argued that its proposal was not based on closing mines, curtailing production, selling K+S's salt business or cutting jobs.

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