Israeli Government to Block $15bn Potash Corp Deal with ICL

on Nov 5, 2012
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**Multibillion Deal Rejected on Growing Concerns over National Resources**

After last week’s talks, the Israeli government has said it will not allow Potash Corp. of Saskatchewan Inc. (TSE:POT), the world’s largest fertiliser producer, to take over or merge with rival Israel Chemicals Ltd. (TLV:ICL) because such a deal is not in the country’s interest, The Financial Times reported on 1 November 2012.
Israel’s finance ministry said in a statement: “The Israeli government will not allow any deal that endangers or impairs economic and environmental interests of the state of Israel and its citizens.” The finance ministry added that its decision to block the potash deal was in line with its policy of putting Israel’s citizens first as beneficiaries of the country’s natural resources.

The veto of the $15 billion (£9.3 billion) deal to create the world’s largest potash producer reflects Israel’s growing resourse nationalism, in which the government blocks foreign attempts to buy mining, oil, gas or agribusiness companies, ensuring that the state benefits economically from its natural recourses. This policy has been intensified in the last year, after several large natural gas and oil discoveries were made in the state, triggering the potential for higher tax and government royalties. The Israeli government also created a sovereign wealth fund to invest the revenue it expects to take in from natural resources.

**Potash Corp Bid to Become Industry Leader**
!m[Takeover Bid Rejection Underscores Growing Resource Nationalism in Israel](/uploads/story/716/thumbs/pic1_inline.png)With a nearly 13.8 per cent stake, Potash Corp is currently the second-largest shareholder in Israel Chemicals Ltd (ICL), whose mines harvest potash from the Dead Sea. Since it acquired the stake in 1998, the Canadian company has been trying to buy the rest of ICL, but its attempts have been rebuffed. Earlier this week, Israel Corp. Ltd. (TLV:ILCO), ICL’s parent company, announced that Potash Corp has made another push into becoming an industry leader by starting a new round of talks with the Israeli government.

Currently, more than 80 per cent of global potash supplies are concentrated in the hands of six companies – Russian UralKali (LON:URKA), Belarusian Belaruskali, Mosaic (NYSE:MOS) of the US, Germany-based K+S (PINK:KPLUY), Potash Corp and ICL. According to data compiled by Bloomberg, if Potash Corp successfully acquires its Israeli rival it would become the largest producer of its namesake crop nutrient with control of about 25 per cent of global production capacity.

Potash Corp declined to comment on its takeover bid and the Israeli government rejection. Meanwhile, ICL could not be reached, the FT reported.
**Acquisition Attempt amid Falling Potash Prices**
The talks come amid a difficult potash market situation. The weakening global economy has put pressure on the prices of the naturally occurring soil nutrient. According to commodities analysts, the price is unlikely to increase much in the short term, given the ongoing economic slowdown in major commodities consumers such as China and India.
Underscoring the impact of the weaker prices, in August, international mining giants BHP Billiton (ASX:BHP) and Vale S.A. (NYSE:VALE) shelved development of two big Canadian potash projects. In a further sign of the weakening state of the market, in October, Potash Corp reported a 22 per cent drop in third-quarter earnings on the back of thin potash demand.