Investors in Potash One may be unwise to bank on a better offer than the $434m offered by Germany's K+S, despite the uptick in fertilizer sector consolidation, analysts have said.

Shares in Canada-based Potash One hit Can$4.62 in Toronto on Monday, well ahead of the Can$4.50 that K+S is offering, suggesting that some investors believe a rival suitor may emerge with a higher bid.

However, a "significant" break fee of $16.5m payable to K+S if Potash One accepts a rival offer - plus the "strong approval" of the Saskatchewan group's board and a generous offer - imply that a "better bid is unlikely", Wellington West Capital Markets said.

"We recommend tendering" to the offer, the broker said.

K+S is offering Potash One shareholders an 82% premium, compared with the Canadian company's stock price in August, before BHP Billiton's bid for potash giant PotashCorp sent shares in the sector soaring. 

'Low chance' 

At Salman Partners, Jaret Anderson cut his rating on Potash One shares from "top pick" to "hold" at their current price, the highest since the last spike in potash prices two years ago.

"The prospects for a superior bid are low," Mr Anderson said.

"We believe Potash One management fully marketed this asset and that the K+S offer likely represents the best cash bid available."

Potash One shareholders should "sell into strength".

Alternative bets 

The recommendation comes despite Potash One owning, in its Saskatchewan-based Legacy project, an attractive greenfield site, with potential reserves sufficient for annual production of 2.9m tonnes of potassium chloride, the basis of potash fertilizers, for 47 years, according to a recent feasibility study.

However, the mine will cost an estimated $2.7bn to develop, a sum which prompted the group last year to hire as chairman Robert Friedland, a well-known mining financier, who had been seen as likely to source the cash from Asia, a major potash importing region.

China's Sinofert attempted to piece together an offer for Saskatchewan's PotashCorp, the world's top potash group, which earlier this month saw a bid from mining giant BHP Billiton thwarted by a Canadian government veto on its plans.

Nonetheless, Mr Anderson recommended that investors may be better moving from Potash One "into other development potash names that offer more upside", flagging Amazon Mining Holding as a "top pick".

Wellington West said that the K+S bid "affirms the strategic value of potash, and should cause shares of Saskatchewan-based and other junior fertilizer companies to move higher".

Potash One shares stood at Can$4.50 in lunchtime trade in Toronto on Tuesday, down Can$0.03 on the day.

K+S shares closed up 1.6% at E49.02 in Frankfurt.