In a deal that is sure to come under the regulators microscope as detailed in a recent report by financial house Monex BMO Securities, two agricultural powerhouses Potash Corp of Saskatchewan and Calgary-based Agrium Inc. have agreed a potential tie-up that would create one of the biggest fertilizer and farming retailing entities in North America, worth around $40 billion.
A spokesman for Potash said in a statement that the combined firm would be one of the largest natural resource providers in the country and the biggest crop nutrient company on the globe. Potash is currently a world leader in the crop nutrient sector by capacity.
The two companies previously announced they had entered into discussions at the end of last month and the merger would be the latest in a line of tie-ups in the sector which include giants of the seed industry like Monsanto and Bayer, and Syngenta and ChemChina.
Even in the face of those massive mergers, the Potash - Agrium combination would create a conglomerate that will dominate the North American fertilizer landscape, controlling around 30 percent of all nitrogen and phosphate production on the continent.
The deal comes in the wake of a tough few years for the agricultural sector as prices plummeted in response to lowered demand and an inventory glut. Wheat and corn prices are at an 8-year low, causing farmers to think twice about boosting production and purchasing fertilizers and similar products.
Details of the deal are still hazy, however anonymous sources close to the discussions have said Agrium shareholders will receive 2.24 common shares for each of their own and Potash shareholders will get 0.4.
Shares for Potash were increased a small amount on Friday afternoon trading at $17.04. Agrium shares went untraded and stayed at $95.22. The split for the new company will be slightly in favour of Potash, whose shareholders will own 53 percent, with Agrium shareholders owning the remainder. The deal is expected to be finalized in the middle of next year.
On a proforma basis, the companies said the new entity would have had a net revenue of over $20 billion last year and they will expect yearly operating synergies of half a million dollars moving forward after the tie-up.
Agrium’s current CEO Chuck Magro will keep his position as the new company’s leader. Potash chief executive Jochen Tilk will be the chairman of the board.
