German fertilizer producer K+S rejected a revised 7.85 billion-euro ($8.6 billion) takeover offer from Potash Corp. of Saskatchewan Inc. that included guarantees of no site closures or firings for five years, according to two people familiar with the bid.
Potash Corp. also proposed a third party monitor the upholding of the new conditions, said the people, who asked not to be identified because the full contents of the letter to the K+S board haven’t been made public.
K+S rejected the latest offer in part because it felt the lack of legal or cost penalties should the guarantees be broken mean they’ll be impossible to enforce, the people said. K+S also has concerns that if Potash Corp. gains control of more than 75 percent of the company, it could make previous guarantees void, one of the people said.
Potash Corp. maintained the per-share value of its offer at 41 euros. That may be an attempt to put pressure on K+S management, brokerage Baader-Helvea said in a note. Sending a letter to the board, rather than to shareholders, is a sign the Canadian company isn’t prepared to pursue a hostile offer, said Marc Gabriel, a Bankhaus Lampe analyst.
“The market and K+S had both expected a higher offer,” Gabriel said. “This is a confirmation that they want a friendly takeover. It’s basically a game of poker in the quiet summer months.”
A K+S spokesman declined to comment on the guarantees. Potash confirmed it made a new proposal, without specifying the content, and declined to comment further.
Shares of K+S, which reports second-quarter results on Thursday, gained 1.1 percent to 37.11 euros in Frankfurt. Potash fell 0.8 percent to C$35.07 in Toronto.
The proposed price “does not at all reflect the fundamental value of K+S,” the company’s Chief Executive Officer Norbert Steiner said Friday in a statement. “The new proposal of PotashCorp is not in the best interest of the company.”
Efforts to persuade German lawmakers of the merits of a deal have made little ground. The Hesse state’s governing Christian Democrat Union and Green parties argued in the local parliament last month in favor of K+S staying independent and keeping its headquarters in Kassel.