Commodities & Metals

Potash Corp, Agrium Merge in All-Stock Deal

Two Canada-based fertilizer giants announced Monday morning that they have agreed to a merger of equals in an all-stock transaction that will create a company with an enterprise value of $36 billion. Potash Corporation of Saskatchewan Inc. (NYSE: POT) shareholders will hold 52% of the new, as-yet-unnamed company, and Agrium Inc. (NYSE: AGU) shareholders will hold the rest.

Shareholders in Potash Corp. will receive 0.400 common shares of the new company for each share of Potash Corp. common stock they own, and Agrium shareholders will receive 2.230 shares for each share of Agrium stock they own.

The new company will be based in Saskatoon, Saskatchewan, currently Potash Corp.’s headquarters, and Potash Corp. chief Jochen Tilk will be executive chairman while Agrium CEO Chuck Magro will become chief executive officer.

Given the potential $56 billion takeover of Monsanto Co. (NYSE: MON) by Germany’s Bayer, the pending merger between Dow Chemical Co. (NYSE: DOW) and E.I. du Pont de Nemours Inc. (NYSE: DD), and ChemChina’s acquisition of Syngenta, consolidation was a must for Potash Corp. and Agrium. Small may be beautiful, but it can’t compete with huge when it comes to revenues.

Tilk said:

Our merger creates a new premier Canadian-headquartered company that reflects our shared commitment to creating value and unlocking growth potential for shareholders. The integrated platform established through our combination will greatly benefit customers and suppliers, and support even greater career development opportunities for employees.

Magro added:

This is a transformational merger that creates benefits and growth opportunities that neither company could achieve alone. 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 merger is “generally not subject to Canadian income tax” and “U.S. residents will generally receive shares in the new company on a tax-deferred basis.” The transaction is expected to close in mid-2017, subject to regulatory approval, other customary closing conditions, and an approval vote by shareholders of both companies.

Agrium stock closed down about 0.9% on Friday to $95.21 and was inactive in Monday’s premarket trading. The stock’s 52-week range is $79.94 to $105.60, and the consensus price target was $94.09.

Potash Corp. saw shares rise 4% in premarket trading, from Friday’s close at $16.97 to $17.64. The 52-week range is $14.64 to $25.58 and the consensus price target was $16.35.

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