Potash Corp. would not shed K+S operations, sources say

Proposed merger with European company stalled

Potash Corp of Saskatchewan Inc., the world’s largest fertilizer company by capacity, does not plan any closures at K+S AG if its bid for its German peer proves successful, according to people familiar with the matter.

Potash Corp. and K+S have both acknowledged the bid publicly but have disclosed no other details. Sources told Reuters last week that K+S is concerned that Potash Corp. wants to take capacity out of an oversupplied market in order to boost profitability. Potash Corp., however, intends to keep K+S’s German mines operational, would not divest its market-leading salt business, and would continue with the development of a $4-billion legacy mining project in Canada, the people said on Sunday.

Potash Corp. also views K+S’s assets as complementary, with the latter’s specialty business diversifying Potash Corp.’s potash, nitrogen and phosphate business, the people said. It also sees the stable, strong cash flow of K+S’s salt business as attractive, the people added.

Friendly talks between Potash Corp. and K+S started last year, the people said. The chief executives of the two companies met in February to discuss a merger, with Potash CEO Jochen Tilk arguing that a full combination was the most attractive opportunity, according to the sources. Potash Corp. submitted a written acquisition proposal to K+S at the end of May, the people added.

Since then, however, K+S has refused to engage in negotiations with Potash Corp., without communicating a reason, the people said. This is despite Potash Corp.’s assurances that any deal would not be based on labour and other cost savings, and that K+S’s management would be offered important roles in the combined company, the people added.

The sources asked not to be identified because the deliberations are confidential. Potash Corp. and K+S declined to comment.

Potash Corp. has offered to pay around 41 euros ($55.50) per K+S share, valuing the firm at close to 8 billion euros.