Potash Corp, Agrium to merge, creating $36B agriculture giant

• The two companies produce nitrogen, potash and phosphate fertilizers, which farmers use to grow their crops.
• Deal done as fertilizer industry struggles with plummeting prices down more than 80% in eight years.
• Six years ago, when demand from China was pushing up the price of potash, the Australian mining giant BHP Billiton tried to acquire Potash Corp.
• Potash Corp. was founded in 1975 by the province of Saskatchewan, and sold to the private sector in 1989.
• Agrium was founded in 1931 as part of Cominco and became a publicly traded company in 1993.
• Potash had a $14.3 billion market valuation as of Friday’s close, while Agrium’s was $13.2 billion.
• Potash reported an average realized price in the second quarter of $154 US per tonne compared with $273 per tonne a year ago, and well off the 2008 peak of around $900 a tonne — a drop of more than 80 per cent in eight years.

  

(Reuters) - Canada's Agrium Inc and Potash Corp of Saskatchewan Inc said they would combine, a deal that would create a fertilizer and farm retailing giant with proforma enterprise value of $36 billion but also trigger U.S. regulatory scrutiny.

Potash Corp, the world's biggest crop nutrient company by capacity and Agrium, North America's largest farm retailer, said the combined company will be largest crop nutrient company in the world and third largest natural resource company in Canada.

The companies had said on Aug. 30 that they were in talks to merge. The merger will create a company dominant in North America, controlling nearly two-thirds of potash capacity, 30 percent of phosphate production capability and 29 percent of nitrogen capacity, National Bank analyst Greg Colman had said at the time.

The deal would be the latest in a string of agriculture merger attempts, including potential combinations of seed giants Monsanto Co and Bayer AG, and ChemChina [CNNCC.UL] and Syngenta.

Fertilizer companies have suffered lower profits as crop nutrient prices tumbled due to excessive supply and weak demand. Crop prices have also been hurt, with corn and wheat at seven-year and 10-year lows respectively, giving farmers less incentive to maximize production with fertilizer.

Potash Corp shareholders will get 0.400 common shares of the combined company for each share they hold and Agrium shareholders will get 2.230 common shares for each share they own, the companies said on Monday.

Potash Corp U.S.-listed shares were up slightly at $17.03 in light premarket trading. Agrium U.S.-listed shares, which closed at $95.21 on Friday, were untraded.

Potash Corp shareholders will own about 52 percent of the new company, with Agrium shareholders owning the rest after the deal closes, which is in mid-2017.