German fertilizer producer K+S AG has sold its Americas salt unit to the Kissner Group for US$3.2 billion, a move that would provide the company with funds to pay down debt.
The sale of Morton Salt comes a decade after K+S acquired it for US$1.7 billion. It was triggered by a drop in potash prices, which undermined the debt-financing of the company's new potash mine in Canada, called Bethune.
The price tag, to be paid in cash at closing, represents 12.5 times its 2019 earnings before interest, taxes, depreciation and amortization of US$257-million, K+S said.
"With the sale of our Americas salt business, we are taking a giant step in reducing debt. We are thus creating a solid financial basis for the sustainable development of the company," Burkhard Lohr, chairman of the board of executive directors, said in a statement.
The Americas business mainly comprises K+S Chile, formerly known as the Chilean company, acquired in 2006, as well as Morton Salt (USA) and K+S Windsor Salt (Canada), acquired in 2009.
Kissner is a producer and supplier of salt controlled by holding company Stone Canyon Industries Holdings (SCIH), Mark Demetree and affiliates.
"The combination of the Americas salt business with SCIH's Kissner Group Holdings allows us to expand our product offerings to consumers along with our existing government and commercial customers," James Fordyce, Co-CEO of SCIH, noted.
The closing of the transaction, which will allow K+S to focus on potash fertilizer products, is expected to occur in summer 2021. That's why it is also implementing other measures to reduce debt, which should strengthen its balance sheet by more than ?,?2 billion (US$2.3 billion) by that time, Lohr said.
The company had to slash production in 2019 in response to weak potash demand, following the lead of rivals such as Nutrien (TSX: NTR).
In 2015, K+S fended off a ?,?7.9 billion takeover bid from Nutrien, at the time called Potash Corp. of Saskatchewan, of ?,?41 per share.
Potash stockpiles are at a record high, which means it will be months before demand for fresh supply picks up, CRU senior potash analyst, Humphrey Knight, told MINING.COM earlier this year.
Spot prices are expected to remain subdued until late 2020.
- This article first appeared on MINING.com, part of Glacier Resource Innovation Group.