Frankfurt | Reuters — Germany’s K+S will likely reject a seven billion-euro (C$9.7 billion) takeover offer from Canadian fertilizer group PotashCorp, a person familiar with the situation said Thursday.
K+S’s management and board are still due to discuss the offer from Saskatoon-based PotashCorp, and a decision has not yet been taken, but at first sight the bid is deemed as too low and making little strategic sense, the person said.
The value of a mine K+S is building at Bethune, Sask., about 60 km northeast of Moose Jaw, is so far not reflected in K+S’s share price and Potash’s move for the German company is therefore seen as opportunistic and undervaluing K+S.
“The strategy for Potash is to take capacity out of the market to increase its own returns,” the source said, adding that K+S would likely see its relatively high-cost German mines closed after a such deal.
K+S, which has a potash and salt business, also fears Potash will sell the salt business after any deal, the source said.
Earlier, German newspaper Handelsblatt reported Potash was considering making an offer of 40 euros (C$55) per share or more than seven billion euros, citing financial sources.
PotashCorp confirmed late Thursday afternoon it has made a “private proposal” to K+S to negotiate a deal to buy the company.
However, PotashCorp said, there is still “no certainty” an offer will be made, nor any certainty yet as to the terms of such an offer.
— Arno Schuetze is a Reuters financial correspondent based in Frankfurt. Includes files from AGCanada.com Network staff.