Dow’s price for Morton Salt divestment stuns analysts

02 April 2009 19:42  [Source: ICIS news]

TORONTO (ICIS news)--German fertilizer major K+S managed to obtained the Morton Salt business from Dow Chemical at a surprisingly favourable price, analysts said on Thursday.

“I am stunned by it [the price], and the low acquisition multiple,” said Wolfgang Fickus, analyst at Germany's WestLB bank, regarding the $1.675bn (€1.27bn) acquisition.

Fickus and other analysts questioned K+S CEO Norbert Steiner in a webcast conference call on K+S' deal to acquire Morton from Dow Chemical.

Fickus pointed to synergies from the Morton deal, which K+S had not even included in its evaluation of Morton.

He also compared the price with the estimated $2.4bn K+S would have had to pay for Compass Minerals, a similarly-sized US salt firm K+S was reportedly interested in acquiring before it shelved those plans last month, and he compared it with the price it paid for a salt business in Chile in 2006.

Steiner, in response, gave an audible sigh and then said: “That’s a good question. Part of your question you would have to address to [Dow CEO] Andrew Liveris, because it was their decision to choose K+S as the preferred bidder in the last couple of days.”

“But I think it is a fair deal,” he added.

The analysts also probed to find out from Steiner if K+S had quickly benefited because Dow Chemical practically had to sell Morton to raise funds and close its acquistion of Rohm and Haas.

Steiner declined a direct comment. But he said K+S had expected Morton to be sold even when it was still with Rohm and Haas. He would not confirm if there had been earlier talks with Rohm’s management about Morton.

In spite of the size of the deal, Steiner said that even after the Morton acquisition K+S remained financially strong to expand its potash fertiliser business, make further acquisitions, and to invest in environmental protection measures at its sites in Germany.

With Morton under its belt, Kassel-based K+S - already the largest salt producer in Europe and South America - would now become the leader in North America and globally, he said. In Asia, K+S aimed to expand through its Chile salt operations, he added.

($1 = €0.76)

For more on K+S and Dow Chemical visit ICIS company intelligence
To discuss issues facing the chemical industry go to ICIS connect

By: Stefan Baumgarten
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