Germany’s K+S Group, the salt and fertiliser producer, has offered C$434m ($425m) in cash in an agreed bid for Vancouver-based Potash One, whose main asset is a large potash deposit in the prairie province of Saskatchewan.

The bid comes less than a month after the Canadian government refused to sanction BHP Billiton’s hostile $39bn bid for PotashCorp, also based in Saskatchewan.

K+S would also be required to show that its acquisition of Potash One would provide a “net benefit” to Canada as required under the Investment Canada Act.

But the Potash One deal is unlikely to stir up the political opposition generated by BHP’s bid. The Saskatchewan government said on Monday morning that “it's a friendly and also relatively small acquisition, so it isn't of concern to our government”.

Potash One owns exploration licences covering more than half a million acres. Its most promising deposit, known as Legacy, could be developed into a mine with annual output of up to 2.7m tonnes at a capital cost of US$2.5bn. The mine is not due to come into production until 2015 at the earliest.

The acquisition of Potash One would give K+S an urgently needed opportunity to access additional potash supplies.

K+S is grappling to meet rapidly rising demand for the raw material, as its domestic production sites are already running at full capacity. The group has for many years been looking for ways to lift its current potash capacity of 7.5m tons a year.

Efforts to jointly develop potash reserves with Russia’s EuroChem failed recently after disagreement over the time frame for the project.

Norbert Steiner, K+S’s chief executive, recently ruled out the acquisition of another production company, but said the group was stepping up efforts to invest in the development of new sites.

Mr Steiner said on Monday that Potash One would enhance K+S’s international competitiveness, and strengthen the group in Europe as well as overseas.

K+S has offered C$4.50 for each Potash One share, equal to a 31 per cent premium over the recent trading price.

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