German potash supplier, K+S refused Potash Corp of Saskatchewan (USA) (NYSE:POT)’s takeover bid of 7.9 billion euro on Thursday, citing it was quite low and the Canadian corp. may have intentions to dismantle the company that can put employees at risk.
K+S reported that the offer was lacking firm loyalty to save over 14,000 employees of K+S and that it can’t trust vague assurances that have been made. K+S also said that it was not certain whether Potash Corp was willing to continue its salt and fertilizer businesses in their present form.
Chief executive officer at K+S Chief, Nobert Steiner reported that Potash Corp was bound to cut K+S’s current potash production. Steiner also said that Potash Corp sites located in Canada produce at considerably lower costs as compared to K+S’s German sites. It makes eventually little logic for Potash Corp to work on our German sites at the present level, he added.
K+S also said that the takeover proposal of 41 euros a share completely ignores its mining project named “Legacy” that should be of 21 euros a share when 2017 onwards cash flow is considered. The proposal valued the equity of German group at 9.5 billion euros, including net debt of 1.65 billion euros.
An analyst at Bernstein Research, Jeremy Redenius reported that K+S is keeping the door open by silently indicating that they would accept an offer of 50 euros per share, as Legacy’s 21 euro a share price tag became known.
K+S is expecting earnings to hit 1.6 billion euros by 2020, well above 900 million in 2014, driven by the Legacy project. The company decided to acquire the license to work on the Legacy mine back in 2010 to secure growth amid an expected reduction in its German potash reserves.
