German salt mine feels the pinch of takeover fear

GMT 08:25 2015 Monday ,14 September

Arab Today, arab today German salt mine feels the pinch of takeover fear

Salt storeroom at the K+S mine in Philippsthal
Philippsthal - XINHUA

There is more than a pinch of concern among many of the thousands of workers at German giant K+S, the world's biggest salt miner, who fear for their jobs following a near eight-billion-euro ($9 billion) takeover bid by Canadian rival PotashCorp.

K+S, which is also a leading world producer of potash for fertiliser, rejected PotashCorp's unsolicited 7.85 billion-euro takeover bid in July, and spurned a renewed bid at the same price in August, saying it was too cheap and "puts jobs at risk".

But the possibility of the Canadian rival mounting a hostile bid has circulated in the media and reverberated deep below ground.

Employees seem to have taken little comfort from PotashCorp chief executive Jochen Tilk's assurance that the two companies can offer more job security if they join forces. "We look forward to working collaboratively to address any issues, including safeguarding the interests of employees and communities," Tilk said after his first bid was spurned.

Despite the constant 28-degree Centigrade heat in a tunnel 750 metres (half a mile) below ground at the K+S mine in Philippsthal, central Germany, those words seem to have found a cool reception.

- Job for life -

"We don't need anyone to tell us what to do," said Thomas Metz, supervisor of 111 miners in Sector 3 of the mine, a vast subterranean labyrinth as large as the city of Munich, who has been in the job for 35 years and has five years to go before retirement.

Like many of the 14,200 employees at this company, which was founded in the middle of the 19th century, working here is a family tradition. His father and grandfather both laboured in the same mine.

Potash, trapped in layers of salt, is the key ingredient in many fertilisers. It is a market believed to have enormous potential as the world tries to feed a growing population. But the industry has been forced to adapt to a sharp fall in prices, sparked three years ago by the collapse of a de facto oligopoly, in which a few firms exerted control over the market.

Shares in K+S, the only commodity producer on Frankfurt's DAX index, are widely held and some employees are concerned that a high enough takeover offer could tempt investors. PotashCorp's last takeover offer was 41 euros a share -- higher than Friday's close of 35.25 euros.

"It is all the same to funds who want to maximise their profits quickly... we are all scared they will sell," said Metz.

"We fear PotashCorp will close sites," added Vanessa Konkel, an 18-year-old apprentice who is one of only seven women who go underground. Wearing a protective yellow helmet, she uses a machine to fix metal anchors to support the tunnel ceiling.

Potash production in Germany is costly, in part because of the environmental rules. PotashCorp, on the other hand, has excess capacity. That is feeding speculation here that PotashCorp may simply want to control prices.

"The purchase does not make any sense for PotashCorp apart from creating a new consolidation in the potash industry, which is already concentrated," Societe Generale analyst Rajesh Singla said in June.

- Appeal to Merkel -

According to the German press, PotashCorp has promised not to touch the German sites for five years. But K+S argues that the legal conditions mean the promise has little weight.

Five years "is definitely not enough", said 40-year-old mechanic Rene Korngiebel.

Regional politicians have asked Berlin to help out, for example by taking a large enough stake in the group to block a takeover. But Chancellor Angela Merkel's government is not a fan of interfering in business.

"Having a majority shareholder would obviously help us but we don't have any influence over that," sighed Harald Doell, who represents employees on the board.

As they wait, workers cling to their traditions. On the last day at work of a company receptionist, it is time to get out the trumpets for the traditional miners' song, "Steigerlied". He, too, has worked here for his entire career.

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