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Potash Corp. (POT) Makes Private Proposal to Buy K+S - Analyst Blog

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Potash Corp.POT has confirmed that it has made a private proposal to Germany-based K+S Aktiengesellschaft to negotiate the acquisition of the latter by Potash Corp. The company refused to comment further on the aforementioned proposal as a formal agreement about this has yet to be reached. Moreover, there remains an uncertainty as to whether any offer will eventually be made.

K+S also noted that Potash Corp. has submitted a written offer to the company to buy all of its outstanding shares, subject to certain conditions including due diligence. K+S is currently assessing the available options and the process is still ongoing.

K+S is one of the biggest potash producers in the world with annual sales of around €3.8 billion (roughly $4.3 billion). The company has a global distribution network and production facilities across Europe, North America and South America.

The acquisition, if eventually takes place, will allow Potash Corp. to further bolster its presence in the global potash market. Shares of Potash Corp. rose 4.8% yesterday to close the day at $31.89.Potash Corp. remains encouraged by the strength in global potash demand and expects momentum to accelerate through the second quarter, particularly in offshore markets.

Potash Corp., however, cut its full-year 2015 guidance based on higher Saskatchewan potash taxes and its first-quarter performance that came below its initial expectations. The company trimmed its 2015 earnings guidance to a range of $1.75-$2.05 per share from $1.90-$2.20 expected earlier. For the second quarter, it expects earnings to be in the band of 45-55 cents per share.

Potash Corp. faces headwinds associated with macroeconomic uncertainties stemming from weakness in markets outside of the U.S. It is also exposed to challenges in its nitrogen business and pricing pressure.

Potash Corp. remains exposed to a volatile pricing environment. Potash pricing is expected to remain subdued moving ahead. Reduced global energy prices and modestly softer agricultural fundamentals are also expected to contribute to a more tempered nitrogen pricing environment this year. Weak pricing is expected to lead to lower nitrogen margin in 2015.

Potash Corp. is a global leader in fertilizer and related industrial and feed products, and plays an integral role in global food production. Capacity wise, the company is also the world's largest producer of potash and one of the largest producers of nitrogen and phosphate. With the rise in global population and demand for food, these essential nutrients will help farmers increase their crop quality and yield.

Potash Corp. carries a Zacks Rank #5 (Strong Sell).

Better-ranked companies in the basic materials space include CVR Partners, LP UAN , Intrepid Potash, Inc. IPI and LyondellBasell Industries N.V. LYB , all sporting a Zacks Rank #1 (Strong Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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