Potash seeks to raise stake in ICL to 25%

Canadian fertilizer and animal feed giant Potash Corporation is negotiating the acquisition of additional Israel Chemicals stock in a bid to beef up its stake in the Israeli fertilizer manufacturer. 
 
Potash applied to the Ministry of Finance for permission to increase its holdings in ICL to 25%, Calcalist has learned.

To date, Potash holds 13.9% of ICL's shares valued on the market at about NIS 6.5 billion ($1.7 billion).

Potash last acquired ICL stock in February 2010 when it bought NIS 1.5 billion ($390 million) worth of ICL shares (about 2.5%) through Citibank. Potash acquired the stock from foreign bodies at NIS 47 ($12) per share. Presently ICL is traded at NIS 36 ($9.5) per share.
 
In order to gain a holding of 14% or more, Potash needs the Israeli government's stamp of approval. As ICL is a strategic industry and holds natural resources, the government was given a golden share in the company when it was privatized thereby giving the government right of decisive vote.
 
Potash is the world's largest fertilizer manufacturer and is traded on a $33.8 billion market cap. The Canadian company first acquired a 10% stake in ICL in 1998 for about $100 million.
 
ICL is controlled by the Ofer family (52.3%), and Potash is the company's second largest shareholder. The rest of ICL's stock is held by the public and a small NIS 16 million ($4 million) stake is owned by the company CEO Akiva Mozes.
 
If Potash gains the government's approval and exercises it, it will have acquired 11.1% of ICL's stock at a market value of NIS 5.23 billion ($1.38 billion) although investment deals such as these usually do not entail a market value premium.
 
Calcalist has learned that Potash is seeking to purchase public shares, principally those held by institutional investors in Israel and abroad. Calcalist has also learned that in recent weeks, the Canadian company has been examining forming a syndicate of investors from which to buy the stock once it gets the government's approval.
 
The investors were contacted by a foreign bank which did not disclose the purpose of the possible acquisition to the shareholders. Estimates are that ICL will remain with its present stake; ICL's holding company, Israel Corporation is privy to the move,
 
Estimates on the market are that although Potash is seeking to acquire the stock now as a purely financial investment, which is how it presented its request to the Israeli authorities, it is in fact aiming to gain control of ICL in the future.
 
As mentioned, Potash requested permission from the Israeli authorities to boost its holdings in the company to 24.99% above which it will need further approval. Once it is poised to acquire control of the company, it will need yet another approval from the Israeli authorities.

The big question is whether the government will give Potash its seal of approval. A source knowledgeable of the Ministry of Finance told Calcalist that the government has yet to reach a decision on the matter, and that there are several essential issues involved therein which are still under consideration.
 
If Potash gains a 25% stake in ICL, this might have far reaching implications – it might gain the right to appoint a member of the board of directors which might pose a problem as the two cops are competitors in the fertilizer market.