Potashcorp withdraws K+S proposal due to ‘challenging macroeconomic conditions’

Potash Corp’s (NYSE:POT) US$8.7bn bid for European rival K+S (ETR:SDF) has hit the buffers amid headwinds in the commodity markets and, according to Potash Corp, a “lack of engagement” on the part of K+S management.

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PotashCorp of Saskatchewan Inc.is withdrawing its $8.6 billion takeover proposal of K+S. “We are convinced that we can successfully develop our company based on a consistent implementation of our two-pillar strategy in the long term”.

“This will increase pressure on K+S management to come up with measures to improve the value of K+S in this challenging commodity environment”, Baader Bank analyst Markus Mayer said. The Kassel, Germany-based company now has a market value of 4.56 billion euros, less than before Potash’s takeover offer became public on June 25. As K+S CEO Norbert Steiner said, “Not only does this proposal undervalue our potash and magnesium products and our salt business, it completely disregards the value of our Legacy Project” in southern Saskatchewan.

The statement goes on to say K+S expects significant sales and earnings this year despite a current weakness in the potash market.

Looking forwardFor PotashCorp shareholders, the decision to give up on the deal was far more positive.

K+S shares plunged in early Frankfurt trading Monday, dropping almost 24 percent to 23.58 euros. By staying disciplined, PotashCorp will leave itself in the best position to take advantage of other opportunities well into the future.