Friday, July 10, 2015

Potash Deal For K+S Highlights Industry Issues


Summary

  • Potash bid for K+S seems highly unlikely due to regulator issues, especially in Germany.
  • The deal is needed to limit or consolidate capacity in fertilizer where high margins encourages adding capacity.
  • Potash is not a stock to own unless it can complete this merger at an attractive value and reduce capacity.
   The desire of Potash Corp. (NYSE:POT) to buy out K+S AG (OTCQX:KPLUY) (OTCPK:KPLUF) is no surprise to the market. The German company has high-cost potash mines in Germany, but more importantly, it is building a potash mine in Canada that could flood the market with supply of the valuable fertilizer at a time it isn't needed. Or at least it isn't needed for Potash to maintain its high margins.

 Read the full article on Seeking Alpha.


 Disclosure: No positions mentioned. Please read the disclaimer page for more details.

No comments: