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Agrium, PotashCorp in merger talks

(Dave Bedard photo)

Canadian fertilizer giants Agrium and PotashCorp confirmed Tuesday they’re in “preliminary discussions” toward a possible merger-of-equals.

Calgary-based Agrium and Saskatoon-based PotashCorp emphasized in separate statements Tuesday that no decision has yet been made on whether to go ahead with such a merger and no agreement has yet been reached.

“There can be no assurance that any transaction will result from these discussions,” both companies said in their statements.

PotashCorp has an estimated market capitalization of about $19 billion, compared to fertilizer and ag retail player Agrium at about $17.2 billion, according to the Bloomberg news service, which first reported the merger talks early Tuesday.

Saskatchewan Premier Brad Wall said Tuesday he spoke to both companies’ CEOs that morning and both indicated “the interests of Saskatchewan have been at the forefront of even these preliminary discussions,” citing jobs and tax revenue both companies provide in the province.

Agrium, which entered the crop nutrient game as Cominco Fertilizers in 1931, has expanded in both the fertilizer and farm retail space since then, taking over Crop Production Services (CPS) in 1994, United Agri Products (UAP) in 2008 and Viterra’s ag retail business in 2013.

PotashCorp, a former Saskatchewan Crown corporation, was privatized in 1989 and through acquisitions since then has become the world’s biggest potash producer by capacity and one of the largest producers of nitrogen and phosphate.

Both firms’ fertilizer businesses are seen to be at the low end of the market cycle, however, on dwindling fertilizer prices, burdensome supplies and weaker currencies among fertilizer-importing countries.

PotashCorp, for one, recently shut its potash mines in New Brunswick and slowed production at two of its mines in Saskatchewan, citing weak market conditions and excessive supply.

The company also underwent a round of layoffs, plant closures and production slowdowns in 2013, in the wake of the exit of Russian potash miner Uralkali from Belarusian Potash Co. (BPC), its joint venture with partner Belaruskali, creating another significant drag on potash prices.

BPC was one of the world’s two top potash marketing cartels, alongside Canpotex — the joint potash export arm of PotashCorp, Agrium and Mosaic Co., all of which operate mines in Saskatchewan.

Fertilizer industry consolidation has since been brewing. PotashCorp last fall abandoned a takeover bid for German potash firm K+S, which is also building a Saskatchewan mine.

PotashCorp in 2010 also fended off a hostile bid from British/Australian mining firm BHP Billiton — which has also staked a potash claim in Saskatchewan.

Wall, whose government opposed Billiton’s bid for PotashCorp, noted Tuesday that there’s no formal process for the province to make its views known in a merger of two Canadian companies. A foreign takeover, by comparison, requires approvals from Canadian federal regulators and lawmakers.

However, he said, as the host province for PotashCorp’s head office and potash mines and several Agrium operations, “we would absolutely have an interest at stake” in such a merger and would have an obligation to protect such interests.

There may be an opportunity for Saskatchewan to pursue further business development with a merged PotashCorp/Agrium, he added.

Agrium, which in 2013 fended off investor pressure to split its wholesale fertilizer business and ag retail arm, said earlier this year it may see opportunities to buy into proprietary crop genetics or ag chemicals, in view of planned consolidations in the seed and ag chem sectors.

Minnesota-based Mosaic separately noted earlier this month there may be opportunities to pick up underperforming potash and phosphate assets from diversified mining firms. Mosaic last month also idled its Colonsay, Sask. potash mine for the rest of this year. — Network

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