Fertilizer Offensive

The Canadians are Coming

Rocanville Potash Corp underground production supervisor Dave Esslinger displays a sample of potash 1000 metres (3280 feet) below surface at the potash mine in Saskatchewan September 30, 2010. A far-reaching, independent report on the economic impact of a Potash Corp takeover will set the tone for a Canadian political response to BHP Billiton's $39 billion hostile bid or any other offer that surfaces. Picture taken September 30, 2010. REUTERS/David Stobbe (CANADA - Tags: BUSINESS) - RTXSWZS
Digging for the white gold known as potash.
  • Why it matters

    Why it matters

    The German firm could lose its independence in a deal estimated to be worth around €10 billion, or $11.9 billion, including debt.

  • Facts


    • The unconfirmed offer amounts to more than €40 per K+S share, Handelsblatt has learned.
    • PotashCorp used to be the world leader in the fertilizer industry, but has since been surpassed by Russian and Belarusian rivals.
    • This is the second takeover from Canada in two weeks after Hudson’s Bay bought Galeria Kaufhof department store chain on June 15.
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Germany’s K+S is already a thoroughly international operation, and recently boasted its new facilities for potash fertilizer in Vancouver, Canada.

Canadian rival PotashCorp, led by the German chief executive Jochen Tilk, now seem to be returning the favor – with interest:

K+S has become a takeover target for the fertilizer maker PotashCorp from the Canadian province of Saskatchewan, K+S confirmed on Thursday evening after Handelsblatt had reported on the matter.

“K+S is currently assessing the available options; this process is still ongoing,” K+S said in a short statement.

According to information obtained by Handelsblatt from financial sources, the K+S supervisory board is examining an offer estimated to be worth €10 billion, $11.9 billion, including debt.

The takeover bid for the German firm with 14,000 employees has apparently been well prepared by its rival from Canada. Potash would apparently pay more than €40 per K+S share, meaning it would value the company at roughly €10 billion, including debt. Against its current share price, that’s a 40-percent increase. On Friday, K+S shares were up 26 percent at €36.70 at 0943 GMT.

PotashCorp wants to secure its share of the $20-billion potash market against expanding rivals Russia’s Uralkali and Belaruskali in neighboring Belarus.

Sources told Handelsblatt that Potash had made clear the offer was “friendly,” but that it would not hesitate to resort to more aggressive methods if necessary. That fits with the current low-interest rate environment, which makes it easier to finance hostile takeovers.

Potash’s CEO, the German manager Mr. Tilk, has led the Canadian firm since the middle of last year. Mr. Tilk, who studied mining engineering in Aachen, worked for years at the Canadian mining firm Inmet.

PotashCorp, once the global leader, is today the third-biggest fertilizer producer after two eastern European rivals, Russia’s Uralkali and Belaruskali in neighboring Belarus. Buying K+S, however, would restore the Canadians to the top position.

PotashCorp wants to secure its share of the $20-billion potash market against rapidly expanding rivals Uralkali and Belaruskali. Potash is potassium-rich salt used as fertilizer. Together with K+S, Potash would control eight percent of the world potash market.

The strong European and South American footprint and the wider portfolio of K+S is another attraction for the Canadians. Besides its main focus on potassium and magnesium fertilizers, K+S is also the world’s largest salt producer. It salts business makies up roughly a quarter of its operating earnings.

PotashCorp is around 50 percent bigger than K+S with sales of €5.4 billion and more than twice as profitable with €1.8 billion in operating profit. Its net debt of around €3 billion isn’t ideal for a larger acquisition, but the company’s operating strength should make financing one unproblematic.

There has been a spurt of takeovers in the agrochemical and fertilizer sector in recent years. The driving factor is to create scale in a growth market with long-term potential.


159 K+S-01 k plus s


There are rumors Russian investors may be interested in K+S. Swiss bank Credit Suisse has built up a stake of at least 6.51 percent of K+S’ voting rights. It could be that the bank is acting on behalf of Russian investors.

K+S, which letters stand for “Kali + Salz”, or “Potassium + Salt”, is currently doing well with a strong potash business and price hikes for fertilizers. Measured on its 2014 earnings before interest, taxes and write-downs PotashCorp would pay a factor of eight to take over K+S should the price stay the same.

K+S chief executive Norbert Steiner has recently said the company had made a good start to the year. The firm, which has a history stretching back to 1889, has put its hard times behind it. Mr. Steiner recalled a “Black Tuesday” from 2013, when a Russian rival made steep price cuts, causing the K+S stock to tank 27 percent in a matter of hours. Rating agencies slashed K+S’ bonds to “junk” and Mr. Steiner had to overhaul the entire firm.

The potash market crashed in 2013 after global leader Uralkali suddenly ended its export agreement with rival Belaruskali, which had restricted supply and kept prices elevated. After the deal ended, prices tanked and K+S turnover in 2014 shrank three percent to €3.82 billion. It’s operating results dipped slightly to €641 million, but that figure is expected rise considerably in 2015.

“We don’t have a crystal ball letting us see into the future, but we can prepare for the future. We are cutting costs, we are improving our organization – and we are increasing efficiency in production, administration and sales,” said Mr. Steiner at the company’s annual shareholder meeting last month.


Siegfried Hofmann, Oliver Stock, Maike Telgheder reported from Frankfurt and Düsseldorf. To contact them: s.hofmann@handelsblatt.com, stock@handelsblatt.com and telgheder@handelsblatt.com

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