Potash Corp soothes fears on Israel Chemicals merger

Potash Corp sources say that, without a merger, Israel Chemicals is liable to end up with little competitive capacity against global giants BHP and Rio Tinto.

Potash Corporation of Saskatchewan Inc. (NYSE; TSX: POT) is seeking to soothe Israelis' fears over a possible acquisition of Israel Chemicals Ltd. (TASE: ICL), even if there are no talks with the government about a deal at this time. Potash Corporation plans to come prepared for the public debate, which will become increasingly stormy as negotiations on a deal make progress, sending soothing messages to residents of the Negev.

The messages include detailed analysis of the global fertilizer market, which unequivocally state that Israel Chemicals has no choice but to merge if it wants to stay relevant in the market in the coming years, and industry giants cast eyes at the company.

Sources close to Potash Corporation in Israel say that the fears of Israel Chemicals workers committee and of local authorities in the south are natural, but that they are not alert to the changes in the global fertilizer market, and that they lack information. The sources say that the parties which are aware of the market circumstances will use a possible deal with Israel Chemicals for political purposes in upcoming local elections.

"In any event, Potash Corporation has not yet decided whether it wants to acquire Israel Chemicals and how much to offer for it. The structure of a deal is completely unknown," said a source close to the Canadian company.

"If Potash Corporation wanted to make less money, it wouldn’t be interested in acquiring Israel Chemicals. The evaporation pools in Israel won't be transferred to Jordan, because that is impossible. If it wanted to, it would acquire Jordan's Arab Potash Company. How could Potash Corporation bring foreign workers to Israel from Jordan? Does Intel bring foreign workers to Israel from India? This is a catchy argument, made to officeholders in the south, even though it is baseless," said a source.

Sources said that if and when a deal is reached, all of Israel Chemicals' past commitments would apply to Potash Corporation, including activities in the environment, labor contracts, and the salt harvesting project. Israel Chemicals would be Potash Corporation's spearhead in the African, Far Eastern, and Indian markets in order to compete against global mining giants Australia's BHP Billiton Ltd. (LSE: BLT; NYSE: BHP; ASX: BHP JSE: BIL) and Rio Tinto Ltd. (NYSE; LSE; ASX: RIO), which plan to establish themselves in the global potash market in the coming years. The sources at Potash Corporation say that, without a merger, Israel Chemicals is liable to end up with little competitive capacity against these global giants, and see its revenue fall. At that point, Israel Chemicals will have to be put up for sale, but from a much weaker position.

Published by Globes [online], Israel business news - www.globes-online.com - on March 13, 2013

© Copyright of Globes Publisher Itonut (1983) Ltd. 2013

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