Canada not likely to oppose K+S bid for Potash One - analysts

23 November 2010 16:24  [Source: ICIS news]

The flag of CanadaTORONTO (ICIS)--Canada’s government is not likely to oppose K+S’s proposed takeover of fertilizer firm Potash One for Canadian dollar (C$) 434m ($425m), analysts and commentators said on Tuesday.

K+S's agreed bid for Potash One on 22 November came amid some doubt over foreign investment in Canada after the government this month blocked BHP Billiton’s $39bn hostile bid for PotashCorp – only the second time since 1985 that a foreign takeover of a Canadian company was rejected.

However, Horst Hueniken, a research analyst at US investment firm Stifel Nicolaus, said unlike PotashCorp, Potash One was a “pre-revenue” company with a greenfield project that had yet to be developed.

The takeover by Germany’s K+S would provide the necessary capital to develop the project in Saskatchewan province, thus creating jobs and providing a new tax revenue stream for the government, Hueniken said in a briefing on Canadian television.

In the case of BHP’s bid for PotashCorp, Hueniken said, the government had been concerned about tax revenue losses, the possibility that BHP could take PotashCorp out of the Canpotex potash export marketing group and the effects on global potash pricing.

“None of these issues apply in [the Potash One] instance. [Potash One] is far too small a player to have a meaningful impact on potash pricing,” said Hueniken.

“In this case, there are no tax revenues being lost, because there were no tax revenues to begin with,” he added.

Commentators also noted that Saskatchewan’s premier, Brad Wall, came out in support of K+S's bid. Wall's opposition to BHP's bid had been critical in prompting the federal government to block that deal.

In a televised interview on 22 November, Wall said Saskatchewan welcomed K+S's move as a foreign investment that would lead to the development of a new mine in the province.

Wall also said the government would “strongly encourage” K+S to join Canpotex.

Canpotex, which includes PotashCorp, Agrium and Mosaic, was a “strong marketing alliance” that gave Saskatchewan a “position of strength” in marketing its potash resources globally, Wall said. He rejected descriptions of Canpotex as a cartel.

Wall added that Saskatchewan had actually seen more interest in investments in the province since the federal government’s rejection of BHP’s bid.

K+S's bid for Potash One comes as BHP is planning to develop its $12bn Jansen potash project in Saskatchewan and Brazil’s Vale is considering a $3bn potash project in the province.

If all three projects – K+S/Potash One, BHP and Vale – were to be completed, they could threaten PotashCorp’s leading role in global potash markets, analysts said.

($1 = C$1.02)

For more on PotashCorp, K+S and other producers, visit ICIS company intelligence
here for more on fertilizers
To discuss issues facing the chemical industry go to ICIS connect

By: Stefan Baumgarten
+1 713 525 2653

AddThis Social Bookmark Button

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly

Get access to breaking chemical news as it happens.
ICIS Global Petrochemical Index (IPEX)
ICIS Global Petrochemical Index (IPEX). Download the free tabular data and a chart of the historical index

Related Articles