Potash Corp./Saskatchewan (USA) (NYSE:POT) Plans To Keep K+S Mines Open If Merger Deal Goes Through

Canadian mining company, Potash Corp./Saskatchewan (USA) (NYSE:POT) announced that it plans to keep the K+S AG mines open once the acquisition deal is complete.

The two companies have been holding merger talks that were initiated in the first quarter. The announcement was made following speculation from critics that Potash Corp. would shut down some of the high-cost mines owned by K+S. Experts also believe that if the government would be against the sale of the German mines if the merger is to take place. The analyst suggested that Potash Corp would shut down a Canadian mine that has been in development under K+S in order to bring down the cost of the acquisition.

According to Volker Bouffier, it is in the interest of both firms to maintain the jobs that are tied to the mines. The announcement was made in light of fears that the take-over deal would lead to job losses. Sources familiar with the matter revealed that the company plans to place the European headquarters in Germany.

Analysts also expect Potash Corp. to face antitrust issues in its acquisition proceedings. The two firms have not revealed the financial terms of the K+1 acquisition. However, it has been estimated that Potash’s bid is close to 60% of K+S 12-month average stock value of 26 euros. The stock price had been long-standing before it surged a week ago following the proposal by Potash. The value currently stands at about 41.60 euros per share. A week ago, the Wall Street Journal reported that Potash Corp. had proposed a deal for 40 euros per share.

The two firms announced that they were taking an informal approach over the acquisition deal. The current acquisition proposal was submitted in May. K+S had initially rejected an acquisition proposal issued in February by Potash Corp. Currently, the Canadian company’s prices have dropped from a 2011 high as demand remains low.

A source familiar with the dealings revealed that K+S might reject Potash’s acquisition proposal because it underrates the potential of two leading position of two potash producers in North America.

Abbott Michael

Abbott Michael

Michael joined US Markets Daily in 2009 and is a national news reporter focusing on economic issues, data analysis and the financial health of state and local governments.