October 27, 2016 / 2:32 PM / a year ago

Agrium-Potash merger set for shareholder approval -source

President and CEO Chuck Magro of Agrium addresses shareholders during the company's annual general meeting in Calgary, Alberta, May 6, 2015. REUTERS/Todd Korol

TORONTO/WINNIPEG (Reuters) - Shareholders of Agrium Inc (AGU.TO) and Potash Corp of Saskatchewan Inc (POT.TO) are set to overwhelmingly approve a merger of the two Canadian fertilizer producers, according to a source familiar with the situation, despite initial skepticism from Agrium investors.

About 99 percent of the votes from both groups of shareholders are in favor of the transaction, said the source, who spoke on condition of anonymity as the matter is not public. About half of the votes have come in, the source said.

Potash shares dipped slightly in New York and Toronto on Thursday, while Agrium stock edged higher.

The merger requires two-thirds support of votes cast by shareholders of each company.

Last month, Potash and Agrium agreed to join forces in an all-stock deal that will allow Potash shareholders to own 52 percent of the new company, with the rest going to Agrium shareholders. Fertilizer profits have slumped as prices fall due to excessive supplies and weak crop prices.

Some Agrium investors said at the time they were uneasy about the deal because it would give them greater exposure to the slumping crop nutrient potash. Agrium shares fell when the deal was announced.

Capital Innovations LLC will vote its shares in both companies for the merger because it provides scale and diversification to weather a slumping market, said Michael Underhill, Capital’s chief investment officer.

“It’s accretive (and) they look like attractive companies together. That combination affords a better platform.”

Agrium and Potash could not be immediately reached for comment.

In a statement earlier on Thursday, Potash Corp Chief Executive Jochen Tilk said that early votes were “overwhelmingly in favor of the merger.”

The company on Thursday posted a smaller-than-expected drop in quarterly earnings and lowered its profit outlook for the year, warning that significant recovery in the potash market would happen only late this year or in early 2017.

On Nov. 3, shareholders of Agrium and Potash will vote on the deal in separate meetings in Calgary, Alberta and Saskatoon, Saskatchewan, respectively.

Investor advisory firms Institutional Shareholder Services and Glass Lewis support the merger.

The tie-up, combining the world’s largest fertilizer capacity of Potash Corp with Agrium’s farm retail business, the biggest in North America, still faces regulatory scrutiny in Canada and the United States. Closing is expected in mid-2017.

In North America, the new company will control about two-thirds of potash capacity and nearly one-third of phosphate and nitrogen capacity.

Reporting by John Tilak in Toronto and Rod Nickel in Winnipeg; Editing by Phil Berlowitz and Andrea Ricci

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