Potash Corp./Saskatchewan (USA) (NYSE:POT) shares rose 4.87% yesterday to a closing price of $31.90 per share after it was revealed by German miner K+S AG that the Canadian firm has made an acquisition offer. Considered the first bold decision by Potash Corp.’s CEO Jochen Tilk, who has only been on the job for a year, the bid is also said to have the potential of going hostile, depending on conditions. K+S AG, the biggest supplier of potash in Europe, said that it is “assessing the available options” regarding the bid of the Saskatoon-based company which it happens to be building a potash mine in Saskatchewan for. Potash is a term used for mined or manufactured fertilizer forms of potassium. According to Reuters, Potash Corp./Saskatchewan (USA) (NYSE:POT)’s proposed acquisition may be worth close to 8 billion euros or US$8.9 billion. However, Reuters’ sources also told the news organization that K+S AG, whose own shares jumped by almost 40% today on the Deutsche Börse Xetra, is likely to reject the Canadian fertilizer firm’s proposal as being too low, despite some analysts wondering if the opposite is actually the case.
If Potash Corp./Saskatchewan (USA) (NYSE:POT)’s proposal for K+S AG is successful, the German potash miner will be the first German blue-chip firm to be acquired by a foreign company in a decade, Reuters notes. If the deal fails, it would mark the second large international acquisition failure for Potash Corp. since 2013, when it tried to buy Israel Chemicals Ltd. The acquisition of K+S AG would give Potash Corp. a sizable first presence in Europe. K+S AG believes that Potash Corp. wants to acquire the firm to utilize its capacity and increase its profits, as Potash Corp. is operating under its full capacity due to low potash prices, further complicated by an oversupplied North American market.
These difficulties may be why Potash Corp./Saskatchewan (USA) (NYSE:POT) has experienced a decrease in interest among the hedge funds tracked by Insider Monkey. At the end of the first quarter, a total of 32 of the hedge funds tracked by Insider Monkey were long in this stock, a 3% decline from the fourth quarter. Total value of holdings decreased to $994.74 million in the first quarter from $1.17 billion in the fourth quarter of 2014. This is a notable slide of 15.05%, considering the stock only declined a marginal 8.69% in the first quarter.
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Insider Monkey also tracks insider sentiment in stocks like Potash Corp./Saskatchewan (USA) (NYSE:POT) to resolve whether insiders of a company are betting on their firm’s stock or not. For Potash Corp., however, there were no tracked insider sales or purchases of shares in the first and second quarters of the year.
Taking this into account, let’s review the latest action encompassing Potash Corp./Saskatchewan (USA) (NYSE:POT).
What does the smart money think about Potash Corp./Saskatchewan (USA) (NYSE:POT)?
Of the funds tracked by Insider Monkey, Jean-Marie Eveillard’s First Eagle Investment Management had the largest stake in Potash Corp./Saskatchewan (USA) (NYSE:POT), of 18.9 million shares worth $609.54 million. The stake made up 1.45% of the firm’s 13F portfolio. Dmitry Balyasny’s Balyasny Asset Management followed with 2.52 million shares, worth close to $81.4 million, comprising 0.7% of its total 13F portfolio. Other members of the smart money that hold long positions comprise Adage Capital Management, led by Phill Gross and Robert Atchinson, Ray Dalio’s Bridgewater Associates, and David E. Shaw’s D.E. Shaw & Co., L.P.
Due to the fact that Potash Corp./Saskatchewan (USA) (NYSE:POT) has faced a declination in interest from the smart money, we can see that there is a sect of money managers that elected to cut their positions entirely in the first quarter. Intriguingly, Andreas Halvorsen‘s Viking Global dumped the biggest investment of the “upper crust” of funds followed by Insider Monkey; about 3.15 million shares, totaling an estimated $111.2 million in the stock. Robert Bishop of Impala Asset Management was right behind this move, as the hedgie cut about 1.12 million shares worth $39.5 million from his own portfolio. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 1 in the first quarter.
With indicators pointing to the K+S AG offer being rejected, as well as Potash Corp.’s problems and uninspiring performance for the year, which has led to decreased hedge fund interest, we do not recommend a long position in Potash Corp./Saskatchewan (USA) (NYSE:POT) at the moment. The market seems to be moving towards the same thinking, as shares of Potash have given back 2% of yesterday’s gains so far.
Disclosure: None
