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Potash Corporation Withdraws K+S Proposal: What Does This Mean?

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Oct. 6 2015, Updated 9:05 a.m. ET

Potash Corporation withdraws K+S proposal

On October 4, 2015, Potash Corporation (POT) announced it has withdrawn its bid to acquire K+S Potash. As a result of this announcement, K+S, which is listed on the Frankfurt Stock Exchange in Germany, fell by 24% to 23.8 euros per share. The drop in stock price resulted in the company’s market cap falling by as much as 4.6 billion euros (or $5.1 billion) on October 5. On the other hand, Potash Corporation was trading 4% above its previous close in the pre-market session on October 5.

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The deal

Towards the end of June 2015, Potash Corporation (POT) proposed to take over K+S for 41 euros per share. The deal was valued at 7.8 billion euros (or $8.8 billion). According to Potash Corporation, the bid represented a 59% premium over K+S’s last 12-month stock price. In this series, we’ll discuss why Potash Corporation withdrew this deal and what it means for both companies’ stocks.

About Potash Corporation

Potash Corporation is the largest producer of potash fertilizers. The company also produces and markets phosphates and nitrogen crop nutrients. About 59% of Potash Corporation’s gross margin comes from its potash segment, 31% comes from its nitrogen segment, and the remaining comes from its phosphates segment.

Most of Potash Corporation’s operations are in Canada, the United States, and Trinidad. According to the company, its potash operations account for 20% of global potash production. The company’s nitrogen and phosphate capacity accounted for 2% and 3%, respectively, of global capacity in 2014.

Currently, POT, Mosaic (MOS), CF Industries (CF), and Agrium (AGU) form 16.7% of the VanEck Vectors Agribusiness ETF (MOO).

About K+S Potash

K+S Potash is part of K+S Group and is one of the top potash and salt producers in the world. The company is traded on the German stock exchange. It’s one of the blue chips in the DAX index.

In 2013, K+S accounted for 7% of global nameplate capacity. Together, Potash Corporatioin and K+S account for 26% of global KCI (potassium chloride) capacity, followed by Uralkali with 18% and Mosaic (MOS) with 16%. Next we’ll look at why Potash withdrew its proposal.

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