Green shoots or just talk in fertiliser M&A

September 4, 2009

CHINA/There are signs of life returning to M&A in the potash sector — with market speculation that Potash Corp of Saskatchewan may bid for Germany’s K+S.

Canada’s Potash Corp — the world’s largest producer of the key ingredient in synthetic crop fertiliser — said last month that North American potash inventories had fallen in July, an indication that sales of potash had begun to move again after a seizing up of the market.

Some analysts reckon that the market is now reaching a bottom and that there will be a sharp rebound in 2010 as farmers start buying again.

K+S Chief Executive Norbert Steiner told Reuters in an interview on Tuesday that the world’s fourth-largest potash supplier saw an end to a decline in prices in Europe, but that demand remains depressed.

And K+S is not in the strongest position right now. The company is looking at a capital increase as one of a clutch of measures to bolster its balance sheet following its acquisition of Morton Salt from Dow Chemical.

With K+S trading at just over 35 euros/share compared with a price of nearly 84 euros/share a year ago, it is probably time for Potash Corp to at least take a look.

There is also renewed speculation that Potash Corp itself could be taken over by a mining company.

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