Potash Corp. eyes Israeli rival by Pav Jordan (Globe and Mail – November 1, 2012)

Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

Potash Corp. of Saskatchewan Inc., facing sharply lower demand in India and China, is setting the stage for a possible takeover of Israel Chemicals Ltd., in a politically sensitive move aimed at securing new markets for the world’s biggest producer of the crop nutrient.

Potash Corp., the world’s largest fertilizer maker, is looking to buy either all or a part of Israel Chemicals Ltd. (ICL), a $16.4-billion company in which it already owns a 14-per-cent stake.

“Discussions have occurred with Israeli government officials around potential options to increase our ownership stake in Israel Chemical Ltd.,” Potash Corp. said in a brief statement, in response to news out of Israel that it was in merger discussions.

The politically charged talks have involved state officials including Israeli Prime Minister Benjamin Netanyahu, underscoring the importance of ICL – which holds mining rights to the Dead Sea – to the government, which has a golden share in the company.

A merger would put key state assets into the hands of the fertilizer giant at a time when its production capacity is growing but it needs to find new markets. A merger would put key state assets into the hands of the Canadian fertilizer giant at a time when it is already targeting large organic capacity growth.

“The most serious hurdle to the approval of the deal is the public outcry that will arise if [Potash] gets control over Israel’s natural resources, not to mention the worries regarding the environmental impact on the Dead Sea,” Gilad Alper, an analyst with Israel’s Excellence Nessuah Brokerage Services, said in a report.

A bid for ICL would be a stark role reversal for Potash from two years ago, when Canada blocked a hostile, $39-billion takeover bid by global diversified miner BHP Billiton Ltd. after the government declared potash a strategic resource.

Despite its heft in the booming agriculture industry, Potash has seen profits slashed for repeated quarters this year as key buyers in Asia held off on purchases.

Acquiring ICL would provide it access to clients in new areas such as Europe, while strengthening ties to Asia, where Chinese and Indian buyers are increasingly resistant to long-term supply contracts with Canpotex, the international marketing arm of Canadian producers that includes Potash, Mosaic Co. and Agrium Inc.

For the rest of this article, please go to the Globe and Mail website: http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/potash-corp-eyes-israeli-rival/article4789323/

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