Potash Corp drops bid for Israel Chemicals
Potash Corp of Saskatchewan , one of the world's largest potash producers, said on Thursday it was abandoning efforts to take over Israel Chemicals Ltd because of strong opposition in Israel.
Potash Corp, which currently holds a 14 percent stake in ICL, revealed its decision the same day it reported a stronger-than-expected 13 percent rise in profit after renewed sales to China and India.
But while the company said there needs to be a welcoming reception for foreign investment in Israel to make a deal, Chief Executive Bill Doyle dismissed thoughts that it might now sell its ICL stake.
"If we saw no possibility ever in Israel, we would get rid of the shares," he said on a conference call, adding that political factors and popular sentiment there may change. "We don't say 'never.' We've been patient and we'll see what happens there."
After backing off its pursuit of ICL, the world's sixth-largest producer of the crop nutrient potash, the Canadian company will have to find other ways to bolster its shipments to Asia. Potash Corp will soon face stepped-up competition from Canadian mines under construction by K+S AG and BHP Billiton Ltd.
A foreign takeover of ICL would have ranked as the largest ever of an Israeli company. Opponents feared job cuts and the loosening of national control of an important Israeli company.
In a statement, Israel Chemicals said partnerships with strong players such as Potash Corp are welcome but are only one option to ensure its continued growth and success.
"In the potash market, ICL is a medium size, low cost producer and by no means dependent on other players in the market," ICL said, adding that it never received an offer.
A spokesman for Israel Finance Minister Yair Lapid, who publicly opposed a potential takeover, declined to comment.
Several analysts said Potash Corp's decision was no surprise.
Potash Corp's decision may have reflected uncertainty in world commodity markets that has caused many mining companies to rein in capital spending, said Ernie Lalonde, senior vice-president of mining at DBRS Limited, which rates the debt of companies.
"The current political environment is anti-corporate and protectionist in terms of natural resources, so it was possibly the worst time for them to try and do such a deal," said Richard Gussow, an analyst at Israel's DS Brokerage.
Even so, Potash Corp will see a sharp increase in free cash flow when it wraps up its 10-year, $8 billion expansion program in the next year. Doyle said he continues to be interested in a majority stake in Chilean potash producer SQM, of which Potash owns 32 percent of shares.