OTTAWA â€"The Potash Corporation of Saskatchewan confirmed on Wednesday that it has approached the government of Israel about increasing its stake in Israel Chemicals, another fertilizer maker.
In a separate regulatory filing, Israel Corporation, the holding company which currently owns 52.5 percent of Israel Chemical said that representatives of Potash met with Prime Minister Benjamin Netanyahu “in connection with the examination of a possibility for a merger†of the two companies. The Canadian company has also met with other Israeli government officials, although Israel Corp. added that neither it nor Israel Chemical have been directly approached.
Potash, which currently owns 13.84 percent of Israel Chemical, and Israel Corporation offered no details about the size or scope of any merger and both noted that no deal has been negotiated.
The Israeli government does control Israel Corporation, which is owned by the Ofer family. But its approval would be critical to any attempt by Potash to take control of Israel Chemical. In June, Potash abandoned an attempt to increase its holdings in Israel Chemicals to as much as 25 percent, expressing frustration about delays in the regulatory approval process.
Potash know the other side of that process as well. In 2010, the government of Canada blocked a hostile $38.6 billion bid for Potash by BHP Billiton, the large Australian mining company.
Analysts were divided about whether Israel would support an acquisition of Israel Chemicals by Potash. There is speculation that the companies may attempt to limit any political backlash by structuring the transaction in a way that would leave Israel Corporation as a substantial minority holding in Potash.
In an investment note, Joel Jackson of BMO Capital Markets, a unit of the Bank of Montreal, said that Potash would likely have to pay premium of perhaps more than 30 percent to acquire control of Israel Chemicals, which has a market value of about $16 billion.
