Russia potash producers Uralkali, Silvinit announce merger plans

20 December 2010 17:56  [Source: ICIS news]

By Alice Tozer

LONDON (ICIS)--Russia’s Uralkali and Silvinit, two of the world’s largest potash producers, on Monday announced details of a merger to capitalise on rising demand.

The combined entity would be formed by Uralkali taking over Silvinit for around $8bn (€6.08bn) in cash and shares, according to reports.

If approved by shareholders on 4 February 2011, the resulting company would have the third largest potash production capacity worldwide behind North American giants PotashCorp and Mosaic.

“The rationale behind the move is to bring value to both sets of shareholders and to increase the market contest of the potash industry, one which is becoming increasingly understood,” said Uralkali CEO Pavel Grachev during a conference call.

The merger and acquisition (M&A) would likely be completed by the end of May 2011, according to Grachev.

The acquisition phase would see Uralkali acquire a 20% share stake in Silvinit, followed by a statutory merger in which Uralkali ordinary shares would be issued for the remaining share capital of Silvinit, which would then cease to exist.

It is expected that 2011 will be a strong year for the potash industry, thanks to a continued recovery from 2009’s global economic downturn.

Dwindling food stocks worldwide and a growing population are forcing a realisation of potash’s capacity to multiply crop yield. Increased interest in biofuels is also stimulating interest in the potash market since they are produced from crops that require large amounts of the fertilizer.

While Uralkali is Russia’s largest potash producer, Silvinit has licence rights to the Polovodovsky deposit, at the foothills of the Ural Mountains, which has estimated resources of 3.08bn tonnes of ore.

The news is the latest in a series of M&A activity witnessed in recent weeks in the potash fertilizer sector.

($1 = €0.76)

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By: Staff Reporter
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