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Potash Corp. looks to raise Israel Chemicals stake

Potash Corp. logo at the entrance of the company's office tower in downtown Saskatoon.

Liam Richards/liam richards/The Globe and Mail

Canadian fertiliser maker Potash Corp. of Saskatchewan Inc. is seeking permission from Israeli authorities to raise its stake in rival Israel Chemicals to 25 per cent, a government source said.

"Potash Corp. has requested approval from the government to raise its stake to 25 per cent," the source, who asked not to be identified, told Reuters on Monday, confirming a report in the Calcalist financial daily.

Potash, the world's largest fertilizer manufacturer, holds 13.9 per cent of ICL's shares valued on the market at 6.5 billion shekels ($1.7-billion U.S.). An 11.1-per-cent stake has a market value of about 5.23 billion shekels.

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Shares in ICL, the world's sixth-largest potash producer and the second-largest company on the Tel Aviv Stock Exchange, were up 5 per cent to 37.65 shekels in afternoon trade.

A spokeswoman for ICL said the company does not comment on matters relating to its shareholders.

Potash last acquired ICL stock in 2010 when it bought about 2.5 per cent.

ICL is a strategic company which has exclusive rights to some of Israel's most valuable natural resources, including Dead Sea minerals. The government was given a golden share in ICL when it was privatized and as a result government approval would be required for Potash to raise its stake.

Barclays Capital analyst Joseph Wolf said Potash's request is not surprising, noting it has a strategy to own good potash assets and already holds 30 per cent of Arab Potash Corp, which mines the Dead Sea from the Jordanian side.

"We believe this news should be a positive catalyst for the shares in the short term, as there has not been that much stock-specific good news lately," said Mr. Wolf, who rates ICL "overweight".

"In addition, it highlights that Potash sees value in ICL beyond any change in royalty fee or Dead Sea salt harvest cost," Mr. Wolf said.

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ICL is in talks with the government over who should pay the costs of a plan to harvest salt in the Dead Sea to prevent flooding caused by ICL's mining activities. The government is also considering increasing royalties ICL must pay to extract minerals from the Dead Sea.

ICL is controlled by the Ofer family through holding company Israel Corp, which owns 52.3 per cent. Potash is the company's second largest shareholder.

According to Calcalist, Potash Corp. is seeking to purchase public shares, mainly those held by institutional investors in Israel and abroad. The investors were contacted by a foreign bank which did not disclose the purpose of the possible acquisition.

Mr. Wolf said he believes that longer term, the best source of the stock would be for Israel Corp. to reduce part of its stake but still maintain control.

Estimates on the market are that although Potash is seeking to acquire the stock now as a financial investment, it could aim to gain control of ICL in the future, Calcalist said. If it seeks control of ICL, it will need further approval from Israeli authorities.

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