K+S signed supply deal with Koch Fertilizer to fend off PotashCorp play

K+S recently signed a supply deal for potash fertilizer from its Legacy mine in Canada to strengthened its position as an independent supplier as it battles an unwanted takeover bid from Canada’s PotashCorp.

 

K+S said it had agreed an exclusive deal to supply Koch Fertilizer with 500,000 tonnes per year of granular potash for Koch’s U.S. customers, representing about a quarter of the mine’s capacity.

 

The Legacy mine K+S will be the first built from scratch in the oversupplied global potash industry in almost 40 years and is thought to be a motivator of Potash’s 7.9 billion-euro (C$11.4 billion) bid. 

 

The acquisition of the Legacy mine could enable PotashCorp to better control supply in North America and support prices. K+S has rejected the bid as undervaluing the company but has left the door open to an improved offer.

 

Analyst said the agreement was negative for K+S shareholders as it undermined the attractiveness of the company to PotashCorp and would make it tough to keep prices for the commodity above marginal costs. K+S said it had not received any negative feedback from investors about the Koch deal.