K+S Shares Rise as Russian Melnichenko Buys Stake (Update4)
By Antonio Ligi and Stefanie Haxel Enlarge Image/Details
Sept. 14 -- K+S AG, Europe's largest producer of potash, had a record increase on the Frankfurt exchange after Russian billionaire Andrei Melnichenko bought a stake, adding to investments that include a rival fertilizer maker.
K+S shares climbed 10.46 euros, or 10 percent, to 111.52 euros at the close of trading in Frankfurt, giving a market value of 4.6 billion euros ($6.4 billion). The 6.75 percent stake in K+S was purchased through Melnichenko's investment arm Linea, Julia Ernst, a spokeswoman for the Kassel, Germany-based chemicals company, said today.
Melnichenko is ranked 23rd among Russian billionaires with a fortune of $4.6 billion, according to Forbes. K+S extracts 8 million tons of potash and magnesium, which gets processed into fertilizer at factories currently running at full speed. The German company has already undertaken joint potash projects with Moscow-based rival EuroChem, controlled by Melnichenko.
``One could read certain takeover ambitions into the move, since K+S, being largely a potash producer, would nicely add to EuroChem's activities,'' Christian Faitz, a Frankfurt-based analyst at Sal Oppenheim, said in a note today. ``The justified takeover speculation should today fuel the share price.'' He has a ``strong buy'' rating on the stock.
Germany's BASF AG, the world's largest chemical company by sales, owns about 11 percent of K+S, according to data compiled by Bloomberg.
Looking for Return
Melnichenko isn't planning any increase in his stake in K+S at this point in time as he wants to see a return on his investment first, Vladimir Melnikov, his spokesman said today. The stake is too small to influence the company, though EuroChem and K+S should work more closely, he said.
``This is a financial investment,'' Melnikov said. ``K+S is a company with good corporate management, and has high potential in a sector, which Linea knows very well.''
Germany's Boersen-Zeitung reported earlier that the Russian had become an investor and that he controls EuroChem, the world's seventh-largest fertilizer producer.
Together with Sergei Popov, he controls OAO Siberian Coal Energy Co. EuroChem, established in 2001, produces more than 100 chemical and mineral-based products. Higher raw-material and transportation costs clipped earnings last year, prompting the Russian company to embark on another round of cost cuts including the shedding of unprofitable units
Welcome Investor
K+S has had talks with Linea management and welcomes investors that are convinced of and support its strategy, Oliver Morgenthal, a spokesman for the German company, said in an interview today. He declined to give any details on the subject of the talks.
``The company has a big free float and such news fuels speculation,'' said Carsten Kunold, an analyst at Merck Finck & Co. in Munich. He has a ``buy'' rating on K+S. ``But I think this is a financial investment, if he wanted to take over the company he wouldn't start with such a small stake.''
K+S was raised to ``buy'' from ``accumulate'' today by analyst Stefan Roehle at Independent Research GmbH.
Potash prices have been on the rise as rising meat consumption boosted demand for animal feeds from countries such as China, India and Brazil. Demand for the mineral, used in animal feed and agriculture, will exceed supply until at least 2012 and possibly until 2015, the company has forecast.
Chief Executive Officer Norbert Steiner may spend $1 billion to open a new mine. Talks are under way with a partner to develop a $2 billion site with an annual capacity of 2 million tons, he said in an interview on Sept. 3.
K+S has six mines in Germany. The company can't expand further in Germany and producers are currently extracting potash in Canada, Russia and Europe, and recent discoveries have been made in Argentina and Asian countries such as Thailand and Laos.
RWD Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
