CALGARY — Potash Corp. of Saskatchewan and Agrium have agreed to merge in a deal that would create a global agricultural giant worth an estimated US$36 billion.
The deal would bring together Saskatoon-based PotashCorp’s huge fertilizer mining operations – the world’s largest by capacity – with Calgary-based Agrium’s extensive global direct-to-farmer retail network.
Both companies say the new firm would have close to 20,000 employees, with operations in 18 countries.
News of the deal comes as the fertilizer industry struggles with a steep drop in prices in recent years following a ramp-up of production and the breakup of a Russia-Belarus potash trading cartel in 2013.
PotashCorp reported an averaged realized price in the second quarter of US$154 per tonne compared with US$273 per tonne a year ago, and well off the 2008 peak of around US$900 a tonne.
Analysts expect the combined company would be better able to control fertilizer output and may lead to mine closures.
Potash companies have already made moves this year to cut costs and production, with PotashCorp shutting its recently opened Picadilly mine in New Brunswick in January and temporarily closing some Saskatchewan mines. US-based Mosaic Co. has closed its potash mine near Colonsay, Sask., until market conditions improve.
The industry has looked for consolidation in the past, with PotashCorp pushing for a US$8.7-billion takeover of K+S Group last year that was rebuffed by the German fertilizer group.
PotashCorp itself was the target of a US$38.6-billion takeover bid by BHP Billiton in 2010, but the Canadian government ultimately blocked the offer as not having enough net benefit for Canada.
Analysts expect the deal to face less scrutiny than the BHP proposal because both companies are Canadian, but it will still have to go through regulatory and Competition Bureau approvals.
The Saskatchewan government formed PotashCorp in 1975 as a Crown corporation before it was privatized in 1989. Agrium was founded in 1931 as part of Cominco and became a publicly traded company in 1993.News from © Canadian Press Enterprises Inc. 2016