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Potash Corp. Scraps Proposed Offer for Israel Chemicals

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Potash Corp. Scraps Proposed Takeover Bid for Israel Chemicals
A mill operations superintendent at the Potash Corp. of Saskatchewan Lanigan mine, inspects potash in a warehouse at the company's facility in Lanigan, Sasketchewan. Photographer: Geoff Howe/Bloomberg

April 25 (Bloomberg) -- Potash Corp. of Saskatchewan Inc. scrapped a proposed bid for Israel Chemicals Ltd. after Israeli workers and politicians opposed what would have been the second-largest takeover in the Middle East.

“Now is not the time to pursue this opportunity,” Potash Corp. said today in a statement. “While we continue to believe that such a transaction would be of tremendous benefit to stakeholders of both companies and the state of Israel, there must be receptivity to foreign investment and certainty in the rules that govern such investment.”

ICL, the second-largest publicly traded company in Israel, dropped 4.5 percent to 43.40 shekels in Tel Aviv. Potash Corp. rose 2.7 percent to C$41.72 in Toronto, the biggest gain in three months.

Israeli Finance Minister Yair Lapid said April 10 he would “adamantly oppose” the sale of ICL. Yesh Atid, his political party, criticized the deal for what it said was the potential to harm the Negev region, where ICL produces potash. ICL workers will seek legislation to block a foreign acquisition of Dead Sea resources, according to a statement from their union.

“This deal is dead,” Gilad Alper, a Ramat Gan-based senior analyst at Excellence Nessuah Brokerage Ltd., said today in a telephone interview. “It seems clear that in the foreseeable future Potash will not try again.”

Lapid declined to comment, according to an e-mail from Nilly Richman, his spokeswoman.

Uralkali Rivalry

Buying ICL would have given Saskatoon, Saskatchewan-based Potash Corp., control of the sixth-largest potash producer and boosted its share of forecast global production capacity this year to about 27 percent, according to data from fertilizer-industry information service Green Markets.

That would have enabled the Canadian company to vie with OAO Uralkali, a Russian competitor. Uralkali shipped 7.3 million tons of potash last year, the most of any producer, while Potash Corp. shipped 7.2 million tons, according to data compiled by Bloomberg.

Israel’s proximity to Asia would give Potash Corp. an advantage in selling to India, one of the world’s largest importers, according to John Chu, a Toronto-based analyst at AltaCorp Capital Inc.

Potash helps crops withstand drought and strengthens roots. Potash Corp.’s largest potash mines are in the Canadian province of Saskatchewan.

Ofer Stake

Israel Corp., which is controlled by billionaire Idan Ofer, has a 52 percent stake in Tel Aviv-based ICL. Potash Corp., the world’s largest fertilizer producer by market value, already holds a 14 percent interest in ICL, according to data compiled by Bloomberg.

The market value of the remainder of ICL is about 49.7 billion shekels ($13.8 billion), based on yesterday’s closing share price. At that price, a successful acquisition of the rest of ICL by Potash Corp. would have been the largest completed Middle Eastern takeover after Lafarge SA’s $15 billion purchase of OCI Cement Group in Egypt in 2007, according to data compiled by Bloomberg.

The Israeli government can block bids for ICL using its so-called golden share. Potash Corp. was preparing to make concessions to win government support for the deal ranging from job guarantees to a local stock-market listing to allay concern that a deal would harm national interests, a person familiar with the plans said in March.

ICL wasn’t involved in talks about a potential takeover by Potash Corp. and is working on a new growth strategy, the Israeli company said in an e-mailed statement today.

Canpotex Exports

Potash Corp.’s withdrawal comes two years after Canada blocked BHP Billiton Ltd.’s $40 billion hostile takeover bid for the company on grounds that the deal wouldn’t result in a so-called net benefit for the country.

Potash Corp., Mosaic Co. of the U.S. and Calgary-based Agrium Inc. own Canpotex Ltd., which sells their potash exports. In a similar arrangement, Belarusian Potash Co. sells exports from Uralkali and Belarus’s Belaruskali. Potash Corp.’s acquisition of Israel Chemicals would have put more than 70 percent of global production capacity in the hands of the two export groups, from about 66 percent now, Chu said.

Potash Corp. will now focus its “energies on other options to maximize shareholder value,” according to today’s statement.

The lack of a deal in Israel “does leave Potash with more money to increase its dividend or to do share buybacks,” Mark Gulley, a New York-based analyst at BGC Partner LP, said today by telephone.

Potash today reported first-quarter profit and revenue that beat analysts’ estimates as exports of the company’s namesake crop nutrient rose. Net income increased to 63 cents a share from 56 cents a year earlier. The average of 27 analysts’ estimates compiled by Bloomberg was for 60 cents. Revenue climbed to $2.1 billion from $1.75 billion, more than the $1.85 billion average of 19 estimates.

To contact the reporter on this story: Christopher Donville in Vancouver at cjdonville@bloomberg.net

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net

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