K+S CEO incurs investor backlash
FRANKFURT • K+S AG chief executive Norbert Steiner is facing the wrath of investors who have seen three billion euros ($4.4 billion) wiped from the German potash company’s market value after refusing to engage in takeover talks with Potash Corp. of Saskatchewan Inc.
“It is understandable that Mr. Steiner hesitated, but is not understandable that he refused to engage in serious negotiations,” said Hendrik Leber, a managing partner at Acatis Investment GmbH, which holds a 0.65 per cent stake in Kassel, Germanybased K+S. “In my opinion, Mr. Steiner breached his fiduciary duty to the company.”
Fuelling investor anger is the 37-per-cent decline in K+S shares since a July peak, shortly after Potash Corp.’s 41-euroa-share interest became public. The stock dropped 25 per cent on Monday when Potash Corp. said it was withdrawing its 7.85-billion-euro proposal.
The investor backlash has put pressure on Steiner, who will face analysts at a capital markets day on Nov. 12. He may have little to offer them such as share buybacks because K+S is in the midst of its biggest investment in the company’s 126-year- history: its $4.1-billion Legacy Project in Saskatchewan. Also, potash prices have dropped as farmers earning less for their crops buy less fertilizer.
Steiner, now in his ninth year in charge, rejected the Potash proposal after saying the offer price didn’t reflect the fundamental value of K+S, and there was no basis for negotiations. Company spokesman Michael Wudonig reiterated that stance in an email Thursday and said share buybacks aren’t currently on the agenda due to investment requirements related to the preparation of Legacy.
The asset and wealth management unit of Deutsche Bank AG — K+S’s secondlargest investor — was among the investors that had called for Steiner to engage.
K+S stock rose as much as 5.1 per cent in Frankfurt on Friday, its biggest jump since Potash Corp. walked away, and closed up 4.3 per cent at 27.45 euros.
Storebrand ASA has almost halved its stake from 0.07 per cent previously and would welcome challenges to K+S management, said Espen Furnes, a fund manager at Norway’s largest listed life insurer. Investors have been neglected and the onus is now on Steiner to present a plan on how he’s going to create value faster, he said.
The gap between the current stock price and Potash Corp.’s proposal raises the question of whether management should buy back shares, said Uwe Rathausky, who manages one of Acatis’s funds.
“It must be a mouthwatering opportunity in the eyes of management to buy back the companies’ own shares — a test of K+S’s management quality,” Rathausky said in an email.
Not all investors are critical of Steiner. Boris Boehm, a fund manager at Aramea Asset Management in Hamburg, says he believes management did the right thing, especially in light of an “indecent proposal” made by Potash Corp. that guaranteed the executive-board members jobs after the takeover.