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Inside the Agrium and Potash Corp. megamerger
Sep. 15, 2016
Nutrien Ltd
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Canada
PotashCorp CanadaFollow
CanadaThere’s a lot of money in Canada’s fertilizer industry, as the proposed merger of Agrium and Potash Corp. (with a combined market capitalization of more than $30 billion) proves. Potash Corp., headquartered in Saskatoon, Saskatchewan, is the world’s largest potash producer by capacity, while Calgary, Alberta-based Agrium is the largest global agricultural retailer, selling seeds, fertilizers, and crop protection products to farmers. Agrium also has a wholesale division, which produces and markets nitrogen, potash, and phosphate fertilizers.
The proposed merger would create an enterprise with more than 46% of North America’s potash production volume and a strong share of both the nitrogen fertilizers and phosphate markets.
Why is such a megamerger of the two biggest Canadian players in the industry likely to get regulatory go-ahead, when the tie-up of such dominant players in other industries is often rebuffed by government authorities in order to ensure a strong competitive environment?
The main reason is that competition is unlikely to be affected by the deal. Agrium and Potash Corp., along with US-based fertilizer producer Mosaic, already operate the Canpotex joint venture, which collectively handles these companies’ exports.
In addition, the global potash industry faces oversupply (global capacity is estimated to be about 82 million metric tons, compared with global demand of about 60 million tons).
In the unlikely situation that regulatory bodies in North America or Europe find competition concerns, the new megacompany could always sell potash assets to its global competitors (Australia’s BHP Billiton or Germany’s K+S AG).
While the provincial governments of Alberta and Saskatchewan might fret the loss of jobs that may come with industry consolidation, Canadian government authorities are likely to look upon the merger of “local” companies favorably. This is in contrast to BHP Billiton Ltd.’s $40 billion hostile bid to acquire Potash Corp., which was blocked in 2010 after a review under the Investment Canada Act. The purchase by the Australian concern would have likely had a much greater impact on Canadian employment.
The deal, if it goes through, will be the biggest Canadian merger since CNOOC Ltd. bought Nexen Energy ULC in 2013.
Source: Dun & Bradstreet
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