FRANKFURT BASF (BASFn.DE) booked a 900 million euros ($1.2 billion) pre-tax gain from the sale of its stake in German potash miner K+S SDFG.DE, putting weight behind its plan to exit the nitrogen fertilizer business.
Shares of K+S were headed for their biggest one-day slump in almost two years after former parent BASF, the world's top chemicals group by sales, hived off its stake of about 10 percent in the company.
Shares in K+S lost as much as 9.3 percent to 49.20 euros on Friday, the worst one-day percentage drop since June 2009, after BASF placed its 19.7 million shares with institutional investors at a price of 50 euros apiece.
At 1407 GMT, shares in K+S were down 5.4 percent while BASF's shares slipped 0.7 percent.
The accelerated bookbuilding transaction via BofA Merrill Lynch (BAC.N) gave BASF a pre-tax book gain of 900 million euros, BASF said in a statement on Friday.
"While the transaction is clearly a financial one-off, it underlines BASF's recent and strategically positive initiatives to clarify its portfolio structure," wrote BHF Bank analyst Annett Weber, adding that the book gain was in line with her expectations.
BASF said earlier this month it was preparing to sell "major parts" of its nitrogen fertilizer business, which is under pressure from low-cost producers in the Middle East, such as Saudi Basic Industries Corp 2010.SE, or Sabic.
Players there are using their cheap access to natural gas, the feedstock needed for nitrogen, to make massive inroads into the fertilizer market.
K+S is bound by an agreement that runs through 2014 to market BASF's nitrogen fertilizers products.
The share sale could heat up takeover speculation regarding K+S, Silvia Quandt analyst Harald Gruber said, adding that Russian fertilizer peer EuroChem, too, could sell its stake of almost 14 percent in K+S.
"All the big mining companies belong to the group of potential buyers of K+S -- this primarily refers to BHP Billiton (BLT.L) (BHP.AX), Vale (VALE5.SA) and Rio Tinto (RIO.L) (RIO.AX)," Gruber said.
DZ Bank analyst Heinz Mueller, in turn, voiced caution: "I think a sale of K+S is rather unlikely. For large mining companies, K+S's market position is probably too small."
The German miner's domestic potash deposits give it little growth potential, neither does its strong focus on mature European markets. In addition, its production costs are high compared to industry peers.
To address these drawbacks, K+S in November agreed to buy the Canadian holder of mining licenses Potash One KCL.TO and plans to invest about $2.5 billion in developing its projects.
(Reporting by Andreas Kroener, Alexander Huebner, Christoph Steitz, Ludwig Burger and Daniela Pegna; Editing by David Cowell)