Real Mergers & More in Potash Sector (POT, BHP, VALE, KCL.TO)

Potash Corp. of Saskatchewan (NYSE: POT) may have seen its shares surge on a buyout offer from BHP Billiton plc (NYSE: BHP), but there is other merger that is standing out in the sector.

A company in Canada named Potash One Inc. (KCL.TO) has agreed to a friendly takeover by K+S AG in a deal valued at C$4.50 per share.  The companies noted that this represents a 31% premium over the weighted average price over the last 10 days and their boards of directors  is recommending it to shareholders.  So that the company will not face some of the troubles seen in the last failed merger the two have outlined the benefits here.  The report shows an expected production capacity of up to 2.7 million tonnes which will lead to approximately $2.5 billion being invested in Saskatchewan AND a creation of up to 300 highly skilled jobs.

JPMorgan has resumed Potash Corp. of Saskatchewan with an “Overweight” rating with a $155 target based upon it being well positioned to capture earnings growth due to high prices in grain and in low usage rates.  Moody’s has also last week raised the outlook to positive now that the pending merger is behind it along with better fundamentals; but S&P trimmed  Potash’s outlook last week based upon its $2 billion buyback plan.

A Brazilian mining company is looking to invest in Saskatchewan — and the government is happy to hear it.

Vale S.A. (NYSE: VALE) is also expanding in Saskatchewan after the BHP-Potash deal fell apart.  What the total investment will be could be up to $10 billion, but a report last week threw a figure of $3 billion for a potash development project outside of Regina, Saskatchewan.

JON C.OGG