* Israel has rejected Potash approaches in the past
* Analysts: Deal unlikely in near term, if at all
* ICL, Israel Corp shares jump; Potash up slightly
By Steven Scheer and Rod Nickel
JERUSALEM/WINNIPEG, Manitoba, Oct 31 Potash Corp
, the world's No. 1 fertilizer producer, is ramping up
efforts to buy Israel Chemicals Ltd so it can shore up its
leverage with China and India, top consuming countries that are
expected to drive much of the industry's growth.
Although a deal is likely a long way off, acquiring ICL
, the world's sixth-largest fertilizer producer, would
give Canada's Potash Corp better shipping access to China, India
and other Asian economies. Rising Asian incomes and populations
are expected to trigger greater fertilizer use to produce more
Potash Corp confirmed on Wednesday it has been in talks with
Israeli officials on acquiring ICL. To get a deal done it would
need approvals from Israel's Government Companies Authority, the
prime minister and the Antitrust Authority to increase its 13.84
percent stake in ICL. If it does win approval in Israel, it
would still likely need further antitrust approvals from a range
of global regulators.
"This deal cannot be ruled out. However it is unlikely to
happen in the near term," said Virginie Boucher-Ferte, an
analyst at Deutsche Bank, in a note to clients.
About 34 percent of ICL, which has a market value of about
$15 billion, is traded on the Tel Aviv Stock Exchange and a deal
would be the largest foreign takeover of an Israeli company.
Potash Corp, which kept its Canadian status in 2010 after
Ottawa vetoed a $39 billion bid from Anglo-Australian miner BHP
Billiton Ltd, has a market value of around $35 billion.
Conglomerate Israel Corp, which owns a majority in
ICL, said Potash Corp Chief Executive Bill Doyle has met Israeli
Prime Minister Benjamin Netanyahu to push for a deal, while
financial daily Calcalist said Netanyahu has instructed his
staff and the finance ministry to examine it.
"The company confirms it is aware that Canada's Potash is in
talks with various government agencies that included a meeting
with the prime minister regarding examining the possibility of
merging ICL with Potash," Israel Corp said in a statement.
A year ago, Potash sought to raise its stake in ICL - which
also produces a third of the world's bromine - to 25 percent.
The Israeli government gave initial approval, but Potash pulled
the request when regulators took too long to respond.
According to Calcalist, Potash now seeks 100 percent of ICL,
which has potash and phosphate mining rights on Israeli
CHANGE IN FOCUS
Taking control of ICL would boost Potash's projected 2015
capacity of 17.1 million tonnes by about one quarter, folding in
a company that Bank of America Merrill Lynch says controls about
20 percent of India's potash imports, and 15 percent of China's.
ICL would give Potash low-cost assets and boost the clout of
marketing group Canpotex, even if the agency didn't formally
expand its mandate to Israeli potash, said National Bank
Financial analyst Robert Winslow.
"At the end of the day, they would control that supply, so
effectively it would be part of the (Canpotex) oligopoly."
Canpotex currently sells potash produced in Saskatchewan by
Potash Corp, Mosaic Co and Agrium Inc
and is owned by the three companies.
Potash Corp, already the world's largest producer of the
crop nutrient potash, has long acted as the swing producer
within the sector, cutting production when demand is weak to
stabilize prices and boosting output when prices are strong.
It currently ships the bulk of its output into North and
South America, but China and India are critical to its fortunes.
The Saskatoon, Saskatchewan-based company last week reported a
22 percent drop in third-quarter profit, largely due to stalled
talks between the two countries and Canpotex.
Shares of ICL gained 5.2 percent, while Israel Corp's shares
rose 5.6 percent on Wednesday. Potash Corp shares gained 0.6
percent in New York and 0.5 percent in Toronto.
Potash CEO Doyle said last week that the company's equity
investments are the second-best potash assets after its own.
"We own them with the long-term goal of having a majority
position in each one. It doesn't happen overnight, but we think
they're a very, very valuable part of our company, and it's more
than just a monetary thing," he told analysts.
Potash Corp also has stakes in Arab Potash Co Plc
in Jordan, Sinofert Holdings Ltd in China and SQM
Boucher-Ferte said it was not clear whether Potash would
offer ICL shareholders a premium for their stock. She said
Potash would have to give Israel the right to repatriate licence
rights if a hostile country or entity took control of Potash.
Analysts believe the deal would benefit Israel Corp, which
could stand to win a 20 percent stake in Potash and become a
more recognised international player.
Potash Corp will soon have cash to spend as it winds down a
nine-year, $8-billion expansion plan in 2013. It could also sell
down its equity investments, Joel Jackson, an analyst at BMO
Capital Markets, said in a note.
But with Israel headed for elections in January, discussions
will likely be on hold for a while.