Canada, home to new global agricultural giant — BUSINESS REPORT

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.

Potash Corp. of Saskatchewan Inc. and Agrium Inc. are both based in Canada. Following the close of the transaction, PotashCorp shareholders will own approximately 52 percent of the new company, and Agrium shareholders will own approximately 48 percent on a fully diluted basis. Agrium U.S. -listed shares, which closed at $95.21 on Friday, were untraded. “Chuck and I will run this company together”, he said in an interview.

PotashCorp is now the world’s largest producer of potash and the third-largest producer of nitrogen and phosphate, three of the main ingredients to produce fertilizer. Fertilizer makes up as much as one-third of costs for USA corn farmers, who are already hurting due to falling grain prices.

US lawmakers said last month that they plan to hold a hearing to examine this wave of mergers, saying the deals could potentially reduce competition and lead to higher prices.

The premier also likes that head office would remain in Saskatoon. The merger would leave Mosaic Co as North America’s only other major potash producer.

It’s the latest in a string of mega deals in the agricultural chemicals market announced in the past year as producers of fertilizers, pesticides and seeds struggle with low commodity prices and weak demand.

Agrium’s Chuck Magro said in a news release Monday morning, “This is a transformational merger that creates benefits and growth opportunities that neither company could achieve alone”.

Under the agreement, PotashCorp shareholders will receive 0.4 of a share of the new company for each common share of PotashCorp they own, while Agrium shareholders will receive 2.23 shares for each Agrium share they own.

“It’s not about shutting down operations, it’s about lowering costs of production”, said Magro. “(Retail) is a much more stable business than the wholesale business”. The board of directors will have equal representation from both companies, and Agrium will designate the independent lead director.

The proposed merger is contingent upon a favorable vote of two-thirds of each company’s shareholders.

Agrium has been bulking up on its retail assets in recent years, including its $300 million deal with Viterra Inc.in 2013 that added 200 new retail outlets to its base. “On the whole, it looks quite positive”, Wall told reporters.

Both CEOs said Agrium’s growing retail business will mesh nicely with Potash Corp.’s massive position in the mining side of the business.

Stikeman Elliott LLP and Jones Day are legal advisers to Potash. Law firms Blake, Cassels & Graydon LLP, Norton Rose Fulbright Canada LLP, Paul, Weiss, Rifkind, Wharton & Garrison LLP, and Latham & Watkins LLP are working with the company.