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Potash Corp. of Saskatchewan Inc. and Agrium Inc., Canada’s largest fertilizer producers, agreed to an all-share merger to create the world’s largest crop-nutrient supplier with a market value of about $27 billion.
The deal will give Potash Corp. shareholders 52 percent of the new producer, which has yet to be named, while Agrium investors will hold the rest, the companies said Monday in a joint statement. Agrium Chief Executive Officer Chuck Magro will be CEO of the combined group while Potash Corp. leader Jochen Tilk will become executive chairman. The new company will be based in Saskatoon, Saskatchewan, the current location of Potash Corp.’s headquarters?
It’s the latest in a string of mega deals in the agricultural chemicals market announced in the past year as producers of fertilizers, pesticides and seeds struggle with low commodity prices and weak demand.
Negotiations between Bayer AG and Monsanto Co., the world’s largest seed company, are advancing after the German company’s $56 billion takeover bid. China National Chemical Corp. agreed in February to acquire Swiss pesticide maker Syngenta AG for about $43 billion, while DuPont Co. and Dow Chemical Co. plan to merge and then carve out a new crop-science unit.
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Putting together Agrium and Potash Corp. will create a company that not only produces commodity fertilizer but also sells it directly to farmers through a North American network of retail stores. Potash Corp. is largely a mining company, extracting potash in underground mines, while Agrium got 77 percent of its revenue last year from its retail arm.
In Monday’s deal, described by both sides as a merger of equals, Potash Corp. investors will get 0.4 of a share in the new company for each share they own now while Agrium shareholders will get 2.23 shares. Potash Corp. gained 2.8 percent to $17.45 at 7:54 a.m. in pre-market trading in New York while Agrium had yet to trade after closing last week at $95.21.
The companies expect to generate cost savings of $500 million a year through the merger. They said they’re committed to marketing group Canpotex Ltd, their joint venture with U.S. fertilizer company Mosaic Co. that handles all three companies’ potash exports outside of North America.
“This is a transformational merger that creates benefits and growth opportunities that neither company could achieve alone,” Agrium’s Magro said. “Combining our complementary assets will enable us to serve our customers more efficiently, deliver significant operating synergies and improve our cash flows to provide capital returns and invest in growth.”
The deal will be implemented by a plan of arrangement under the Canada Business Corporations Act and is expected to close in mid-2017. The merged company will employ about 20,000 people and have investments in 18 countries.
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Potash Corp.’s financial advisers on the deal are Bank of America Merrill Lynch and RBC Capital Markets while Stikeman Elliott LLP and Jones Day are its legal advisers. Agrium’s financial advisers are Barclays Capital Inc. and CIBC Capital Markets while its legal advisers are Blake, Cassels & Graydon LLP, Norton Rose Fulbright Canada LLP, Paul, Weiss, Rifkind, Wharton & Garrison LLP and Latham & Watkins LLP. Morgan Stanley is a joint financial adviser to both companies
