Fertilizer majors Potash and Agrium to merge, face tough scrutiny

Mon Sep 12, 2016 3:10pm EDT
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By Rod Nickel and Siddharth Cavale

(Reuters) - Canadian fertilizer producers Potash Corp of Saskatchewan Inc and Agrium Inc agreed to combine to navigate a severe industry slump by boosting efficiency and cutting costs, but the new company's potential pricing power may attract tough regulatory scrutiny. The proposed all-stock tie-up comes as industry profits have fallen due to excessive supply and soft farm incomes. It would combine Potash's crop nutrient production capacity, the world's largest, with Agrium's farm retail network, North America's biggest, plus its own potash mine and fertilizer plants.

Potash shareholders will own 52 percent of the new company, with a market capitalization of $26 billion. Agrium shareholders will own the rest if the deal closes in mid-2017 as planned.

Agrium Chief Executive Officer Chuck Magro will be CEO of the merged company. Potash Chief Executive Jochen Tilk, who will become executive chairman, said the structure would create an "equal partnership."

"Chuck and I will run this company together," he said in an interview.

Tilk said he was confident the transaction would receive regulators' approval as proposed, without the need for divestitures.

But others were skeptical that regulators would approve a company that would control nearly two-thirds of North American potash capacity and almost one-third of phosphate and nitrogen capacity there.

Fertilizer makes up as much as one-third of costs for U.S. corn farmers, who are already hurting due to falling grain prices.

"This deal has some real antitrust concerns," said Seth Bloom, a U.S. Justice Department veteran who is now at Bloom Strategic Consulting. An antitrust review is unlikely before January, when a new U.S. president takes office, he added.   Continued...

Chris McKay, PotashCorp load-out supervisor at the Cory Mine, examines potash inside one of the storage facilities near Saskatoon, Saskatchewan October 10, 2013.   REUTERS/David Stobbe