K+S (Kassel, Germany) says that it has rejected an “unsolicited proposal” from PotashCorp to acquire all of K+S’s outstanding shares. PotashCorp’s bid is at €41/share ($45.50), a price that “does not reflect the fundamental value of K+S and is not in the best interest of the company,” K+S adds. PotashCorp made a private approach to K+S on 25 June, as CW previously reported.
“Not only does this proposal undervalue our potash and magnesium products and our salt business, it completely disregards the value of our Legacy [potash] project. The book value alone represents €11/share; considering future earnings we calculate a value of up to €21/share. This is not yet reflected in the share price,” says Norbert Steiner, CEO of K+S. “We believe PotashCorp is trying to take advantage of the valuation gap to take over K+S and gain control over Legacy.”
K+S says that it has invested more than €2 billion in the Legacy potash project in Saskatchewan, the first greenfield project in the potash industry in almost 40 years. The project is on its way to being delivered on time and on budget, the company says. Production at the Legacy project is expected commence by the end of 2016 and positive cash flows will be generated from 2017, K+S says. K+S expects its group Ebitda to increase to €1.6 billion by 2020 with the Legacy project contributing on average annual operating cash flow growth of more than 10% up to this point.
K+S sys that it has not been “suitably convinced” that PotashCorp would have a “sustained interest” in continuing K+S’s fertilizer and salt businesses in their current form, which it says are strategically, technically, and economically intertwined. The bid did not satisfactorily address the interests of K+S employees worldwide or the interests of the regions in which the company operates responsibly, the company says. “PotashCorp has made no firm commitments to protect the interests of the more than 14,000 employees of K+S worldwide. Despite repeated requests to address this question, PotashCorp’s answers have remained vague,” Steiner adds.
Ongoing initiatives across the potash, and magnesium and salt, business units provide a strong outlook for K+S, the company says. The company’s salt strategy is expected to produce a sustainable increase in operating profit of up to €250 million by 2020. Meanwhile, K+S’s previously announced efficiency program is expected to deliver cumulative cost savings of more than €500 million by the end of 2016, K+S adds.
By Francinia Protti-Alvarez