Agrium Inc. (NYSE:AGU) and Potash Corp of Saskatchewan Inc are in talks to merge, Bloomberg reported on Tuesday, in what would be tie-up of the world’s biggest crop nutrient company by capacity and North America’s largest farm retailer.
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“No agreement has been reached, and there can be no assurance that any transaction will result from these discussions”, said Potash Corp. Both companies have struggled of late as the drop in commodities prices has damped demand for crop nutrients. Clearly, consolidation has been on the mind of companies in the industry.
The Canadian companies gave no financial details about a possible deal and say there’s no guarantee that a merger will happen.
The cutting face of a potash borer is shown in a deep shaft at the Rocanville potash mine, owed by the PotashCorp of Saskatchewan, in Rocanville, Sask., in this 2007 photo.
WINNIPEG, Manitoba/WASHINGTON (Reuters) – Canada’s Agrium Inc AGU.TO and Potash Corp of Saskatchewan Inc POT.TO said on Tuesday they are in talks to merge, a deal that would create a fertilizer and farm retailing giant worth more than $25 billion but also trigger US regulatory scrutiny. “I’m not surprised at all that they’re having these discussions now, but they wouldn’t have happened three or four years ago when the price was $400-$500 a tonne”. The price to sales ratio is 17. That being said, the agriculture boom days were in years past, and merger rumors back them seemed much more exciting than this would-be merger of equals. Potash surged as much as 15 percent in NY, and Agrium jumped 12 percent.
On Tuesday, Premier Brad Wall told reporters the government has an obligation to protect Saskatchewan’s interests, and it will work to make the province “an attractive place for even more jobs”.
The analyst also noted that whereas the proposed takeover of Potash Corp by BHP Billiton Plc was subject to an Investment Canada Review by the federal government, a deal with Agrium would not.
Given the limited business overlap between Potash Corp. and Agrium, RBC Capital Markets analyst Andrew Wong estimates the combined entity could generate about US$150 million in synergies and cost savings.
Agrium, which had market valuation of about C$16.10 billion, were up 7 percent at C$124.81.
“It’s a made in Canada solution”, said Stephenson. Potash Corporation of Saskatchewan (USA) (NYSE:POT) has risen 6.57% since January 26, 2016 and is uptrending.
In 2013, PotashCorp scrapped a bid for Israel Chemicals – the world’s sixth-ranked potash producer in which the Canadian group is a major shareholder – after a deal attracted opposition from Israeli politicians.
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PotashCorp was privatized in 1989 and listed on the Toronto Stock Exchange.
