An ongoing feud between two leading, global potash producers may be close to a resolution, writes, MoneyShow's Jim Jubak, also of Jubak's Picks, who offers some ideas as to what may be on the horizon if a deal does, in fact, come to fruition.
Shares of producers of potash fertilizer popped Friday, on news that Russian tycoon Suleiman Kerimov will sell his stake in potash producer Uralkali to investor Vladimir Kogan for $3.7 billion.
The thinking is that the sale might end the fight between Uralkali and Belarus producer Belaruskali, that led the two companies to break their partnership, which controls about 40% of global potash capacity, and set off fears of a collapse in the price of potash.
Friday, as of 3:00 PM New York time, shares of Potash of Saskatchewan (POT) were up 2.7%; shares of Mosaic (MOS) were ahead 3.9%; and shares of Germany's K+S (GR:SDF) in Frankfurt were up 4.5%. (Potash of Saskatchewan is a member of my long-term Jubak Picks 50 portfolio.)
Kogan is very closely tied to Russian president Vladimir Putin—he's been dubbed Putin's banker. The sale of Kerimov's 21.8% stake in Uralkali would put shares in the hands of a banker who would, the market presumes, look to rejoin the partnership with Belarus. The semi-official nature of the deal is clear from the involvement of Sberbank and VTB, both big Russian banks with strong Kremlin connections.
The deal is likely to take a couple of weeks to work out—among other details to be negotiated would be the release of Uralkali's CEO Vladislav Baumgertner, who was arrested by Belarus on August 26.
Since ending its partnership with Belaruskali, Uralkali, widely thought to be the world's low-cost potash producer, has ramped up production after having run at an average of 70% of capacity in 2012. That has driven potash prices down toward $300—a level that Uralkali has recently said is unlikely to be breached.
Full disclosure: I don't own shares of any of the companies mentioned in this post in my personal portfolio. When in 2010 I started the mutual fund I manage, Jubak Global Equity Fund, I liquidated all my individual stock holdings and put the money into the fund. The fund did not own shares of any company mentioned in this post as of the end of June. For a complete list of the fund's holdings as of the end of June see the fund's portfolio here.