Potash Corp and Agrium in Merger Talks
Canadian fertilizer majors Potash Corp. of Saskatchewan and Agrium are in discussion about a potential merger, both companies have confirmed. Potash Corp. is the world’s largest crop nutrient company by capacity while Agrium is North America’s largest farm retailer. The two are already partners in Canpotex, Canada’s potash export organization, which also includes US producer Mosaic.
The companies said the talks about a possible merger of equals are at a preliminary stage and no agreement has been reached. The proposal follows other potential mergers in the agrochemical sector, notably between Monsanto and Bayer, and ChemChina and Syngenta. Fertilizer companies are hurting from falling profits as crop prices tumble on excess supply and weak demand.
A deal would create a fertilizer and farm-retailing giant worth more than $30 billion and give Potash Corp. a direct channel to US farmers through Agrium’s stores. The US is one of the world’s biggest users of potash, along with China, India and Brazil.
However, the proposed union would be subject to intense scrutiny from US regulators. A combination of the two would be dominant in North America, controlling 62% of potash capacity, 30% of phosphate production capability and 29% of nitrogen capacity, National Bank analyst Greg Colman told the Reuters news agency.
Observers believe regulatory approval would be hard to get, but could be addressed by the combined firm selling at least one potash mine. The president of the National Farmers Union, Roger Johnson, told Reuters the union will likely oppose the deal since the fertilizer industry is already concentrated.
The companies are similar in market capitalization but Agrium is said to have weathered the downturn better than Potash Corp. because of its balance between fertilizer production and retail sales. In January 2016, Potash Corp. suspended production at its Picadilly mine operation near Sussex, New Brunswick, Canada, resulting in the loss of more than 400 jobs.
Last year, Potash Corp. attempted to buy German mineral producer K+S but eventually withdrew its offer in October. K+S, meanwhile, has announced that commissioning of its Legacy potash mine in Saskatchewan is now underway. The first tonne of potash should appear in the second quarter of 2017, delayed from the original timing of end-2016. The company said it still expects to reach its target production capacity of 2 million t/y at the end of 2017.
