K+S Pledge to Be Open to New Bid Comes With Small Print Warning

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K+S AG indicated it’s open to a new takeover bid from Potash Corp. of Saskatchewan Inc., yet management pledged to pour over the small print for any loopholes that would allow jobcuts or a breakup of the company.

“If a new proposal is submitted we will review it with utmost care,” Chief Financial Officer Burkhard Lohr said in a video posted online. The latest offer “responds to the interests of workers and local communities, but offers no reliability due to far-reaching restrictions.”

The increased scrutiny will be on both sides, as Potash Corp. examines the German company’s latest earnings posted Thursday. K+S reported second-quarter profit which met analyst estimates and Chief Executive Officer Norbert Steiner will seek to use the result as evidence of K+S’s hidden value. By contrast, Potash Corp. will be hoping investors see an unbridgeable gap to its 41 euro-a-share offer if K+S stays independent.

K+S was little changed at 35.95 euros as of 9:25 a.m. in Frankfurt.

K+S last week rejected the latest bid from Potash Corp., which still valued the company at 41 euros per share while offering new guarantees of no site closures or firings for five years. K+S maintains that 50 euros reflects the value of future mines more accurately, and that the lack of fiscal penalties should the job guarantees be broken rendered them worthless.

Earnings before interest and taxes jumped 14 percent to 179 million euros, the Kassel, Germany-based company said. The average estimate of 10 analysts in a Bloomberg survey was 176 million euros. Sales rose 16 percent to 914 million euros.

K+S gave a more precise full-year outlook Thursday, saying it expects Ebit of 780 million euros to 860 million euros on sales of 4.35 billion euros to 4.55 billion euros.

Resistance

In its latest gambit against Potash, K+S said in a statement this week that the majority of private and institutional investors supported the rejection of the bid. Respondents to the shareholder poll represented about 8 percent of the investor base.

There has been resistance to the deal in German political circles too. The Hesse state’s governing Christian Democrat Union and Green parties argued in the local parliament in favor of K+S staying independent and keeping its headquarters in Kassel.

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