On the sidelines of the mega mergers taking place in the seeds- and pesticides-dominated end of the agrochemicals sector, Canadian fertilizer producers Potash Corp of Saskatchewan and Agrium have confirmed reports they are planning a mega merger of their own. The two companies said going together would help them navigate “a severe industry slump” by boosting efficiency and cutting costs in a market environment in which earnings have plummeted due to oversupply and dwindling farm incomes – the same issues have propelled the plans of players such as Dow and DuPont, Syngenta, Bayer or Monsanto.

Earlier this year, Potash launched an unsuccessful attempt to take over Kassel, Germany-based minerals produce K+S. The proposed all-stock transaction planned to take place in mid-2017 would link Potash's crop nutrient production capacity – touted as the world's largest – with Agrium's farm retail network, which is said to be North America's largest. The latter company also has its own potash mine and fertilizer plants.

In the merger, Potash shareholders would get a 52% stake, Agrium shareholders a 48% stake in the new company which would have an expected market capitalization of $26 billion and be based at Saskatoon, Saskatchewan. Agrium CEO Chuck Magro has been designated to become CEO, with Potash chief Jochen Tilk tapped as executive chairman.

The future partners said their deal could generate synergies of up to $500 million, potentially by combining Agrium's western North America-based nitrogen business with Potash Corp's business concentrated in the east. The two fertilizer makers are already partners in Canpotex, Canada’s potash export organization, which also includes US producer Mosaic.

Despite the majority/minority shareholder positioning, Potash and Agrium said the new market player would be managed as an “equal partnership.” While Tilk expressed confidence that the transaction would win regulatory clearance without the need for divestments, analysts noted that antitrust authorities were unlikely to approve a company that would control nearly two-thirds of North American potash capacity and nearly a third of its phosphate and nitrogen capacity.

A successful merger would leave only two major potash producers in North America, the other being US-based Mosaic, the news agency Reuters said. However, K+S is in the process of commissioning its new Legacy mine in Saskatchewan on the doorstep of the potential merger partners, which reports said Potash had hoped to integrate into Canpotex.