Canadian mining company Potash Corporation of Saskatchewan (PotashCorp) has confirmed its bid to acquire K+S Aktiengesellschaft in a deal worth an estimated $8bn.
PotashCorp said in a statement: "There is no certainty that any offer will ultimately be made or as to the terms on which such an offer might be made.
"PotashCorp does not intend to make any additional comments on this matter at this time unless and until it is appropriate to do so, or a formal agreement has been reached."
K+S said PotashCorp informed its board that the company may decide, depending on certain conditions, including a due diligence exercise to acquire it.
A source with knowledge of the matter told The Wall Street Journal that K+S may reject the offer, citing the value as too low.
K+S said the company is evaluating the available options at present.
Scotiabank said that in 2015 Potash Corp is expected to mine around 9.2 million metric tonnes (Mmt) of potash.
Following the merger, the combined company is expected to have almost 27% of global potash capacity by 2017.
K+S is in the process of developing a $2.64bn mine in the western Canadian province of Saskatchewan, which is expected to produce about 2.9Mmt of potash a year by the year 2023.
According to sources cited by Reuters, K+S is worried that PotashCorp is trying to shift capacity out of an oversupplied market to improve its profitability.
The sources also added that if the deal is finalised, PotashCorp could keep the German company’s mines in the country operations and would not sell the K+S’s salt business.
Image: 17t diesel loader in K+S potash mine. Photo: courtesy of K+S Aktiengesellschaft.