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PotashCorp abandons $16bn ICL bid

Potash Corporation of Saskatchewan, one of the world’s leading fertiliser producers, has abandoned its $16bn takeover bid for Israel Chemicals amid mounting opposition within Israel.

The Canadian group, which had been seeking to increase its 14 per cent stake in ICL to build a stronger position in many of its key markets, acknowledged that its plans had failed to muster popular and government support.

PotashCorp said in a statement that while it believes 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”. It concluded that “now is not the time to pursue this opportunity and will focus our energies on other options to maximise shareholder value”.

The company’s decision followed a pledge earlier this month by Yair Lapid, Israel’s finance minister, that he would “vigorously oppose” any takeover of ICL by PotashCorp. Mr Lapid, who joined the cabinet in March after an election campaign dominated by populist themes, also plans a public committee that “will review the Israeli state’s rights over natural resources that are handled by private firms”.

The Canadian group had been negotiating during the past few months with the Israeli state, which holds a golden share in ICL, over the potential increase of its holding. ICL’s Dead Sea potash plant is a leading employer in the Negev region, with about 5,000 workers, who have staged demonstrations because of worries about their jobs.

One of their fears has been that, if PotashCorp were to buy ICL, it would move production to Jordan, on the other side of the Dead Sea, where the Canadian company owns 28 per cent of Arab Potash.

In response to PotashCorp’s decision, ICL said that, while global partnerships with strong players offered continued growth and success, it was “a strong company with an attractive future in all its businesses, including fertilisers”. As a medium sized, low-cost producer, it was “by no means dependent on other players in the market”, it added.

The merger talks between Potash and ICL followed a spurt of M&A activity in the global fertiliser industry, following the almost-$24bn merger of Uralkali of Russia and domestic rival Silvinit in late 2010.

The 2007-08 global food crisis cast the spotlight on the fertiliser industry, with the price of potash jumping 10-fold. Fertiliser prices collapsed during the financial crisis, but in recent years the limited areas of mining potash has led to some of the hardest-fought merger and acquisition battles in the natural resources sector.

Richard Gussow, senior analyst at DS Brokerage in Tel Aviv, said PotashCorp’s announcement “was the final nail in the coffin” after Mr Lapid’s comments opposing the deal.

ICL shares fell 4.5 per cent to 43.40 shekels, while PotashCorp rallied on the news, rising 3 per cent to $40.82.

Joel Jackson, analyst at BMO Capital Markets, said the company’s decision allowed it to look at its options of returning capital to shareholders.