Israel Chemicals Ltd, known as ICL, will acquire Allana Potash Corporation for $137 million. Allana’s CEO, Farhad Abasov, commented that there was no other way to avoid massive dilution of shareholders. Allana’s story resembles the stories of many smaller potash companies. They all have good projects but they face difficulties in obtaining financing. For instance, it is estimated that Allana’s Danakil project in Ethiopia will cost $642 million but the company had only $8 million on its balance sheet at the end of January.
Mr Abasov said that even “if the company could raise half of the money through the debt, which is uncertain, they would still have to raise substantial amounts through equity”. He added as well “that equity would come at a substantial discount to the current price”. The takeover from Israel Chemicals was not the only option that the company had at its disposal. Reportedly, the company could have sold a stake in itself to a state-run Chinese construction firm that would finance the Ethiopian project. However, Allana’s CEO said that the Chinese proposal would be punitive for shareholders. “It would be close to 100 percent, if not more, dilution to shareholders,” Mr Abasov said.
Israel Chemicals Ltd. is a manufacturing concern that develops, manufactures, and markets fertilizers, metals, and other chemical products. The company primarily serves three markets – agriculture, food, and engineered materials. ICL is the world’s sixth biggest potash manufacturer and it produces about a third of the world’s bromine. It is moreover an important producer of pure phosphoric acid, specialty fertilizers and phosphates, water treatment solutions and flame-retardants.