Potash Corp. of Saskatchewan Inc. has been asked by Israeli authorities to clarify its intention to acquire parts or all of Israel Chemicals Ltd., one of the country's largest companies and a key supplier of potash to Europe.
Israel's Finance Ministry told the Canadian fertilizer giant that it would only make a recommendation on a potential merger once a detailed application is submitted, according to a report by Bloomberg News.
The ministry could not be reached for comment about the report, which came a day after statements from Tel Aviv that there was no deal under consideration.
Saskatoon-based Potash Corp. already holds a 14-per-cent stake in ICL, a $16.4-billion company and one of the few major producers of the crop nutrient that is not part of the world's two marketing groups. The other major supplier to Europe is K+S, which is also independent.
Most of the world's potash supply is in the hands of Canpotex, the international marketing arm of producers that include Potash Corp., Mosaic Co. and Agrium Inc., or Canpotex's Russian counterpart Belarus Potash Co., the trading joint venture of Uralkali and Belaruskali.
Acquiring ICL would put key state assets into the hands of the Canadian fertilizer giant at a time when it is already targeting organic growth. It would also provide Potash Corp. with access to the European market, where it is not currently present, and help offset falling demand in China and India, among the world's largest consumers of potash and other fertilizers.
Potash Corp. confirmed this week that it held talks with the Israeli government, including with Prime Minister Benjamin Netanyahu, to discuss raising its stake in the company, but it has not commented further.
Israel's government holds a golden share in ICL, a company that holds exclusive mining rights to the Dead Sea, and its acquisition would have political implications around which Potash Corp. is treading carefully.
With a general election looming in January, the Israeli government faces a tough decision on any deal between Potash Corp. and ICL.
According to a brief statement from the Finance Ministry, the Israeli government would not allow any deal that "endangers or impairs economic and environmental interests of the State of Israel," Bloomberg reported. The statement was reportedly made in response to concerns from a local political party about a potential deal.
Analysts say the most serious hurdle to approval of a deal would be the public outcry if Potash were to gain control over Israel's natural resources, and continuing concerns about the environmental impact of mining on the Dead Sea.
Ironically, Potash Corp. may face in any bid for ICL the same kind of obstacles that helped it fight off a hostile takeover bid from global diversified miner BHP Billiton Ltd. in 2010. The $39-billion bid for the Canadian company was derailed after the government declared Potash Corp. a strategic resource.