I left out a few zeroes on how many shares Richard Kinder purchased in KMI. The dollar amount was right but the number of shares were too few.
Consider Kinder Morgan [KMI]. Although the stock has gotten beaten up lately and a number of hedge fund shorts have been talking down the stock, none of that has affected the appetite of insiders to purchase large amounts of KMI on the open market. For example, Executive Chairman Richard Kinder spent ~$4 billion on 100,000 shares at around $39 per share. Ditto CEO Steven Kean who picked up 12,000 shares recently spending half a million also at $39 per share. 3 big insider buys of KMI stock in the last 3 months and 22 in the last 12 months but during the past year, no insider selling. Now why would these folks be buying? Maybe because they think the shares are cheap at current levels. Contrast the situation at KMI with that at POT. Have we heard of major insider buys at market prices? Any market prices this year? I know I haven't. Maybe that is because the insiders see no reason to put good money to work in that way. Better just to collect stock options and wait for the share price to improve so they can cash in. The day we hear about significant insider buying at market prices, that might be the signal that things are really going to turn around. Until then, we just drift along.
If you have a 5-10 year horizon, by all means, add to your position. But if not, I doubt that you will be satisfied. I have made a lot of money with the AG stocks I hold other than POT which has been a big time loser given that my break even point is $37.80. I am mindful that I get nice dividends but even so, I am not going to tell you that I have not been disappointed. Still, I cannot sing the praises enough for having made a field bet on these companies instead of betting on the one [POT] that I was sure was going to be the big winner. Deal or no deal though, I will keep all the shares I have. I can wait because I am patient and because I am not dependent on any 1 stock.
AGU is up almost 4% today while CF is up 3%. Even pokey MOS is up 2%. But POT? Up virtually nothing and may not even remain in the green. Very glad I made an AG stock field bet long ago instead of betting the ranch on POT. I had thought it would be my top performer. Instead it is the laggard big time.
Take a look at the announcement by Moody's. This is all because of the K&S bid.
There have been reports I have read from folks presumably in the know about K&S intentions once the Legacy project is up and running. The story is that they have no intention of joining Canpotex. One of the problems I see of buying a potential competitor at premium prices merely in order to keep that competitor's product off the market is that soon enough, more competitors show up with just as much product if not more so that POT will not be able to buy or otherwise control. I am thinking specifically about EuroChem which in a few years' time will have their own potash mining operations running courtesy of cheap Russian labor.
Your points regarding the relatively lousy mining assets which K&S has in Germany are well taken. Ditto that the salt business offers POT no attraction. So you really have to wonder whether the move is simply a short sighted one.
I had previously indicated that I thought the potential anti-trust aspect of this would be a problem for the German government as it was in 1997. However--and I emphasize that I am no European anti-trust expert--assuming that POT agrees that in no event will potash production by K&S be limited by Canpotex involvement, it is hard to see what the anti-trust concern would be given that German mine production would be sold in Germany and elsewhere on a stand alone basis as it is now. I am sure this is a topic of discussion under way right now.
Deal doesn't go through. Resumption of dividend increases in 2 years as free cash flow increases. Ralph returns to POT in 2018.
No plant closures. No divestiture or spinoff of salt business. No labor or cost savings. K&S management stays in unspecified but important roles. Offer on the table represents a 57% premium to the average price of K&S's stock over the past 12 months. Notwithstanding the above, K&S is balking at this deal.
Based upon what is being disseminated, this looks like a pretty bad deal for POT.
The troubling part of the German government's opposition in 1997 was that the concern over POT acquiring a 51% interest in K&S then was predicated on anti-trust concerns. One wonders whether this argument will be trotted out again with POT looking to buy the whole company this time around. I am now beginning to think there are more hurdles for this deal to get done than not. Any one of them [e.g., pricing, regulatory/anti-trust considerations, labor union issues, mine closures] can break this deal. Of course it is always 'nothing ventured, nothing gained.'
The German government and its labor unions are concerned about employment, not potash capacity utilization. CEO Tilk knows exactly what it will take to get the government and the unions to go along with a takeover proposal. K&S has just over 14,000 employees but they don't all work in the potash arena. The retention of all such employees will undoubtedly be part of a proposed offer just the way it was when POT sought to acquire ICL, a company now beset by labor problems due to existing management's desire to downsize the company.
So I have to believe that the cost structure for doing a deal already contemplates that all the employees of K&S covered by labor union contracts will be unaffected.
As for how much K & S is worth, nothing will be settled without a fairness opinion by an investment company. In the event that POT makes an offer and K & S says the offering price is inadequate, POT will oblige them to justify the additional price. POT's offer, which is not a lowball one, is already the likely beneficiary of a similar financial analysis. K & S is under a fiduciary obligation to their stockholders to recommend a sale of the company that is in the shareholders' best interest. They will not play games and they will have hell to pay if they refuse a reasonable offer and the share price collapses which it surely will in that instance.
I have now read your 2 most recent posts. Herewith a few observations.
For the sake of argument, I will concede that the decision by POT to increase their operational capacity to 17 MMT has proven to have been a poor decision. We know that now but it remains problematic whether it could have been known 7 years ago. In the meantime, notwithstanding the overruns, the expansionary CAPEX will be done or largely so after next year. There is an incentive to finish Rockanville because it will affect their percentage allocation in Canpotex while New Brunswick will be a very low cost operation outside of Canpotex. You imply that it would make sense to shut all the expansionary CAPEX down even though it is all nearly completed and even though there will be obvious benefits to the completion of the operations in New Brunswick and Rockanville. Actually I don't believe you believe that but rather that there should have been some rethink years ago but sadly that is water under the bridge.
I think your sense that extra free cash flow won't be available to shareholders like me for 3-5 years is pessimistic. You could be right but I have previously posted that I thought the hiatus would be more like 2 years. I still think that, not that I am happy about that.
Regarding K&S and the possibility of a POT acquisition, assuming that (i) both the German government and K&S approve such a takeover (ii)POT does not overpay which former CEO Doyle never would have; and (iii) the terms and conditions associated with such acquisition are not particularly economically onerous, it sounds as if you might switch to a more favorable assessment. Or do I have that wrong? Mighty big assumptions on my part regarding whether this makes any sense, to be sure. One would hope though that CEO Tilk, an educated German, knows how to figure out the circumstances for such an acquisition to be worthwhile.
Still hoping to see you among us before 2020. Say in 2018?
Although there have undoubtedly been cost overruns [e.g., in New Brunswick] during the time period you identified, it is also the case that some of the CAPEX during the past 2 1/2 years could not have reasonably been anticipated by management prior thereto. Examples include the port expansion in New Brunswick, the $50 million expenditure forced on the company by the EPA in connection with its phosphate operations and the Lima expansion driven by opportunities to sell more nitrogen. So I think that a more benign conclusion is warranted than the one you have offered--at least one tempered by a recognition that cost estimates often don't hold up and that things sometimes happen that one could not have anticipated.
The logic of your contention that POT went up yesterday because the K&S situation will go nowhere would have us believe that it is down over 2% today because the deal is now likely to go through. Sometimes the herd gets wild about something and it moves but not necessarily for any good reason and I think that is what happened yesterday. POT shares have been declining for months because there has been a significant drop in hedge fund interest in the company. Not everybody is negative on the company's prospects but a large number of them are which is why they have either cut or eliminated their positions.
Let's hope this isn't a case of let's do something in order to do something. But whether it would be a good deal or a bad one, the return of free cash flow to shareholders in the form of higher dividends and/or share repurchases just went out the window.
I caught that. Didn't need the correction. I try to think in Euro terms when on vacation on the continent which is where I will be headed next spring.
I was just reporting what I read but my comment on it was a "maybe" there would be no deal. I agree with you that if they jumped on it right away it would make them look a little desperate. POT is certainly not trying to do a lowball takeover bid a la BHP Billiton. If nothing else, the AG nutrient stocks are all jumping today which is fine by me. I wonder how this got leaked. Usually things stay mum until either a deal is reached or is rejected. Only then people talk. You are suggesting that things might be a little different in Germany. You could be right. I am sure there are a lot of German shareholders of K&S lifting their beer steins on today's news.
So maybe there will be no deal and today's jump will just disappear from whence it came.