Potash Corp. and Agrium say they are in talks to combine

A combined Potash and Agrium would dominate the crop input market in Canada, and it’s likely Canadian farmers won’t be fans of such a marriage. As such, the merger would need to be reviewed by the Canadian and USA governments, while the European Union would look at the impact on exports to the bloc, said Mark Warner, principal at MAAW Law specializing in Canadian and American antitrust law. The Companys phosphate operations include the manufacture and sale of solid and liquid phosphate fertilizers, phosphate feed and industrial acid, which is used in food products and industrial processes.

If competition concerns about potash do emerge, they could be addressed by selling one or more potash assets to competitors such as BHP or Germany’s K+S AG, Stifel Nicolaus & Co. analyst Paul Forward said in a note. Potash has already cut its dividend twice in the past year, and Agrium has reduced its profit forecasts down several times.

Potash Corporation of Saskatchewan (POT) has been rated by 10 research analysts.

Canadian fertilizer giants Agrium Inc. and Potash Corp. of Saskatchewan Inc. said they were in preliminary talks about a possible merger of equals as the industry contends with slumping earnings amid persistently low prices for crop nutrients. In her comments, Yellen said “the case for an increase (in interest rates) has strengthened in recent months”. “The farmer is in the middle of a squeeze play”.

“The problem that these mergers create is that it’s probably the same industry supplier that is supplying the local cooperative as well as the distributor 50 miles down the road”. PotashCorp is the largest producer, by capacity, of potash and one of the largest producers of nitrogen and phosphate. “That brings a level of diversity to potash that might be beneficial”, said La Ball.

Saskatchewan Premier Brad Wall said the CEOs of PotashCorp and Agrium had called to assure him that the province’s interests in terms of jobs, taxes and economic impact are part of negotiations.

“(A merger) will make them a better force to compete on a global scale”, said Mohsin Bashir, portfolio manager at Stone Asset Management Ltd, which owns Agrium shares, adding however that regulator approval may be hard to gain. Mondelez, which makes Oreo cookies and other snack foods, initially proposed to buy the company earlier this summer, but Hershey is a notoriously hard company to propose mergers with since the majority of the shares are controlled by a non-profit organization.

“No decision has been made as to whether to proceed with such a combination, no agreement has been reached, and there can be no assurance that any transaction will result from these discussions”, simultaneous news releases from both firms stated.

Potash Corp has a bigger market value at $19.5-billion and Agrium is valued at $17.25-billion.