PotashCorp sees ‘lots of hurdles’ to takeover of ICL

PotashCorp, the world’s biggest potash producer by capacity, sees "lots of hurdles" to its plans to take over Israel Chemicals Ltd. (ICL), an executive of the Saskatchewan fertilizer company said Wednesday.

"We just think the possibility of that transaction and what it can do for us in a soft market, and in a strong market, is quite a compelling story," chief financial officer Wayne Brownlee said at a Citi investor conference in New York monitored over the Internet. "The trick is, can we get there? Lots of hurdles to deal with, and we’re trying to do that process right now."

Brownlee declined to identify the obstacles to any deal to increase Potash’s current 14 per cent stake in ICL, the sixth-largest producer of potash, an important crop nutrient.

He said it was difficult to say whether the hurdles were mainly within Israel or with international authorities.

"The truth is, you’re not going to get to the international hurdle unless you get past the Israeli hurdle first," Brownlee said. "You’ve got to get there and see if there’s a transaction that’s a win-win for (ICL) shareholders and the countries that we have exposure to."

Key markets for PotashCorp and ICL are mostly complementary, not overlapping, which should bode well for antitrust rulings around the world, he said.

"The question is, is there a price you’d be prepared to pay that would be good and also be the lowest-cost supplier to any customer in the world as a result of that?" he said. "If you can get that to work, how much effort do you want to put in to see if you can move this through the various approval processes? We’re still trying to make that determination."

Israeli officials have said they plan to meet PotashCorp officials this month before deciding whether to allow the Saskatoon-based company to take over ICL.

Israel’s government holds a so-called golden share in ICL, so any deal would need approval from the finance ministry’s Government Companies Authority, the prime minister and the Antitrust Authority, among others.

Any deal to give a foreign company control of ICL would be politically sensitive in Israel, where a general election is scheduled for January. A takeover by PotashCorp would rank as the biggest-ever foreign takeover of an Israeli company.

About 34 per cent of ICL, which has a market value of some US$15 billion, is traded on the Tel Aviv Stock Exchange.

A lag in securing new supply contracts between North American potash producers and the world’s top two consuming countries, China and India, has weighed down profits and forced PotashCorp to idle mines.

Both of those key potash markets have recently been linked to possible equity investments in PotashCorp rivals Uralkali OAO of Russia and Belaruskali.

Such a development could potentially weaken the leverage potash producers have in price negotiations with China and India, but Brownlee said he is not concerned.

"I would be so surprised to see the owners of Uralkali or the owners of Belaruskali — which is the government of Belarus — to enter any transaction which changed the way they market product. Why would I give up 15 per cent ownership in a company and destroy my business plan, and diminish the value of the other 85 per cent? I’m not too worried about that situation."

The main owners of Uralkali sold bonds exchangeable into shares earlier this month in a deal that could give a Chinese sovereign wealth fund a stake in the company.

Belarus’ president, Alexander Lukashenko, said Tuesday his country is talking with companies from China, India, Europe and the Arab world about selling a minority stake in Belaruskali.

— Rod Nickel writes for Reuters from Winnipeg.

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