K+S Offers to Buy Potash One of Canada in $427 Million Friendly Takeover

K+S AG, Europe’s largest potash producer, agreed to buy Canada’s Potash One Inc. for C$434 million ($427 million) to access reserves of the crop nutrient.

Shareholders of Potash One will get C$4.50 a share in a “friendly” takeover accepted by the Canadian company’s board, Kassel, Germany-based K+S said in a release today. The offer is 24 percent higher than Potash One’s closing price on Nov. 19.

With dwindling capacity and factories running close to full speed, K+S faced pressure to secure new reserves as demand for potash picks up. The deal gives it access to deposits including the Legacy Project, an advanced greenfield site that may yield as much as 2.7 million tons of potassium chloride annually.

“The new potash assets together with our existing domestic potash sites will enhance our international competitiveness,” K+S Chief Executive Officer Norbert Steiner said in the statement.

Steiner said in 2007 that his company was poised to open a new potash mine. No venture materialized and K+S went on to buy Dow Chemical Co.’s Morton salt division two years later, becoming the world’s largest supplier of salt.

Demand Rebound

Demand for the crop nutrient is recovering from a slump and is set to rise by 3 percent to 5 percent annually, the company has forecast.

Potash One’s Legacy deposit -- located in Saskatchewan, Canada -- requires about $2.5 billion in investment and will begin production from 2015 at the earliest, K+S said. The company also has several potash exploration licenses in the Canadian province.

Steiner turned to an acquisition after K+S’s initial plans to ally with EuroChem Mineral & Chemical Co. to develop a site in Russia fizzled out and a tender to reopen a state-owned potash mine in the east German town of Rossleben was postponed.

The company on Nov. 11 highlighted that its capacity, at 7.5 million tons per year, was lower than the 7.8 million tons previously estimated, as existing mines suffer declines in grades. It also announced it will stop selling some low-potash content products along with the closure of a site in France.

K+S faces heightened competition as the potash industry is attracting metals mining companies with the funds to develop potash reserves. Vale SA, the world’s biggest iron ore miner, is pumping about $4.5 billion into its Rio Colorado project in Argentina, and will be supplying the market with 11 million tons by 2017. BHP Billiton Ltd. this month abandoned a $40 billion hostile bid for Potash Corp. of Saskatchewan Inc.

To contact the reporter on this story: Richard Weiss in Frankfurt at rweiss5@bloomberg.net.

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net.

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