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.
Write to Sarah Sloat at sarah.sloat@wsj.com
Access Investor Kit for Potash Corp. of Saskatchewan, Inc.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=CA73755L1076
Subscribe to WSJ: http://online.wsj.com?mod=djnwires