MercoPress. South Atlantic News Agency

Canada's Agrium and Potash create fertilizer and farm retailing giant

Potash Corp is the world's biggest crop nutrient company by capacity and Agrium, North America's largest farm retailer

Canada's Agrium and Potash Corp. of Saskatchewan said they would combine, a deal that would create a fertilizer and farm retailing giant with pro-forma enterprise value of US$36 billion but also trigger U.S. regulatory scrutiny.

 Potash Corp, the world's biggest crop nutrient company by capacity and Agrium, North America's largest farm retailer, said the combined company will be largest crop nutrient company in the world and third largest natural resource company in Canada.

The companies had said on Aug. 30 that they were in talks to merge. The merger will create a company dominant in North America, controlling nearly two-thirds of potash capacity, 30% of phosphate production capability and 29% of nitrogen capacity, National Bank analyst Greg Colman had said at the time.

The deal would be the latest in a string of agriculture merger attempts, including potential combinations of seed giants Monsanto and Bayer, and ChemChina and Syngenta.

Fertilizer companies have suffered lower profits as crop nutrient prices tumbled due to excessive supply and weak demand. Crop prices have also been hurt, with corn and wheat at seven-year and 10-year lows respectively, giving farmers less incentive to maximize production with fertilizer.

Potash Corp shareholders will get 0.400 common shares of the combined company for each share they hold and Agrium shareholders will get 2.230 common shares for each share they own, the companies said on Monday.

Potash Corp shareholders will own about 52% of the new company, with Agrium shareholders owning the rest after the deal closes, which is in mid-2017. The combined company would have had 2015 net revenue of about US$20.6 billion and earnings before interest, taxes, depreciation and amortization (EBITDA) of US$4.7 billion before synergies, on a pro-forma basis, the companies said.

Agrium Chief Executive Chuck Magro will lead the combined company. Potash Corp CEO Jochen Tilk will be its executive chairman.