Mr. Magro, who is to become CEO of the new company, said he is “highly confident” the proposed merger won’t trigger antitrust issues.
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CEO Chuck Magro said in a conference call Monday morning the planned merger is the culmination of two years of private talks with Potash Corp.
Saskatchewan’s Opposition New Democrats are raising concerns about a potential loss of jobs, a loss of influence over the natural resource and about the impact on farmers. We are confident that these synergies are achievable and in the value creation we are describing today.
The decision regarding the name of the parent company has not yet been made; however, it is believed to be a very highly profitable merger as world class phosphate and nitrogen based agricultural production equipment will seamlessly integrate with a large retail network of agricultural inputs.
While the new company has promised to “better serve customers” through offering low-priced potash and nitrogen fertilisers, the merger may exacerbate United States farmers’ pre-existing anxieties over reduced competition in the agriculture industry.
“China and India are tighter with their revenue than they were in the past, but ultimately the world’s gotta eat and potash helps that”, said Pulak.
He added while there’s no complete certainty, those savings likely won’t include big job cuts.
“If the sales aren’t there I can definitely see continued short-term layoffs”, said Pulak.
While the merger process is about to commence, the companies also disclose this among public that in case of dissolution, the terminating party has to pay $485 million the other party. The merger itself will have little immediate impact on global potash price dynamics.
“PotashCorp has never been involved on the retail side as you know, so that’s just been Agrium, so we are not losing a retailer on the fertilizer side for farmers as a result of this merger”. According to Fleishman, the merger will reduce Agrium’s need to buy third-party potash for retail distribution.
Potash Corp. and Agrium stated Monday that they are combining to create the world’s largest crop nutrient firm. Moreover, Potash Corporation’s shareholders will have 52% of the new company’s share, while Agrium shareholders will own the remaining 48% on a fully-diluted basis.
Potash Corp.’s shares slipped around 1.2% to close at $16.76 yesterday while Agrium ended 2.7% lower at $92.64.
The industry has looked for consolidation in the past, with PotashCorp pushing for an $8.7-billion takeover of K+S Group a year ago that was rebuffed by the German fertilizer group.
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PotashCorp itself was the target of a US$38.6-billion takeover bid by BHP Billiton in 2010, but the Canadian government ultimately blocked the offer as not having enough net benefit for Canada. The new company is expected to achieve approximately US$250 million of these synergies by the end of the first year after closing with the full run-rate achieved by the end of the second year. In terms of margins, Potash Corporation of Saskatchewan Inc. has a gross margin of 26.60%, with its operating margin at 21.20%, and Potash Corporation of Saskatchewan Inc. has a profit margin of 13.20%.
