K+S rejects Potash Corp's takeover approach as too low

By Ludwig Burger

FRANKFURT (Reuters) - German potash miner K+S rejected Potash Corp of Saskatchewan's 7.9 billion euro ($8.7 billion) takeover bid on Thursday, saying it was too low and that the Canadian suitor could be planning to dismantle the company, putting jobs at risk.

K+S, owner of the Morton Salt brand, said the proposal lacked firm commitments to protect the more than 14,000 K+S employees worldwide and that it had no trust in "vague" pledges that had been made.

The takeover offer of 41 euros per share "completely disregards" K+S's Canadian mining project, known as "Legacy", which should be worth up to 21 euros per share when future cash flows from 2017 onwards are taken into account, the German company said.

K+S, which is the world's largest salt supplier but derives most of its earnings from potash fertilisers, also said it was not convinced that Potash Corp was interested in continuing the German group's fertilizer and salt businesses in their current form.

K+S shares closed down 2 percent in Frankfurt at 37.02 euros after the offer was rejected.

K+S Chief Executive Nobert Steiner said the Canadian company was bound to slash K+S's current production of potash.

"Potash Corp sites in Canada produce at significantly lower costs than our German sites. But they are under-utilized. Obviously, it makes ultimately little sense for Potash Corp to operate our German sites at the current level," Steiner said in a video posted on the company's website.

The offer values the German group's equity at 7.85 billion euros, or 9.5 billion euros when net debt of 1.65 billion euros is included.

K+S, formerly a part of BASF, said the stock market was currently underrating its salt business and not attributing any value to Legacy, the first new mine in the potash industry in almost 40 years. It will start producing by the end of 2016.

Still, Bernstein Research analyst Jeremy Redenius said K+S "left the door open, implying they would accept a bid of 50 euros per share". He added K+S's 21 euro-per-share price tag for Legacy to the share price of 29 euros before Potash Corp's approach became known.

K+S ruled out opening its books to the suitor for now and declined to say what Potash would need to offer.

People familiar with the matter told Reuters on Sunday that Potash Corp did not plan any closures at K+S.

K+S said it expects earnings before interest, taxes, depreciation and amortization to reach 1.6 billion euros by 2020, up from almost 900 million in 2014, helped by the Legacy project.

The German group agreed to buy the license to develop the Legacy mine in 2010 to secure growth in the face of an expected depletion of its existing German potash reserves in 35-40 years.

(Additional reporting by Patricia Weiss; Editing by Elaine Hardcastle and Susan Fenton)