Agrium and Potash Corp. agree to merge

Agrium and Potash Corp. agree to merge

Merger expected to be completed by mid-2017.

Agrium Inc. and Potash Corporation of Saskatchewan Inc. have agreed to combine in a merger of equals.

Related: Potash’s Tilk wagering that third time is a charm in Agrium talks

Agrium Inc. and Potash Corporation of Saskatchewan Inc. have agreed to combine in a merger of equals. (Photo: mindscanner/Thinkstock)

Under the agreement, which the boards of directors of both companies unanimously approved, a new parent company will be formed to own both companies. PotashCorp shareholders will receive 0.400 common shares of the new company for each common share of PotashCorp they own, and Agrium shareholders will receive 2.230 common shares of the new company for each common share of Agrium they own. The exchange ratios represent the exchange ratios of the two companies at market close on the NYSE on Aug. 29, 2016, the last trading day prior to when the companies announced that they were in preliminary discussions regarding a merger of equals, which is consistent with the approximate 10 day and 60 day volume weighted average prices through that date. Following the close of the transaction, PotashCorp shareholders will own approximately 52% of the new company, and Agrium shareholders will own approximately 48% on a fully diluted basis.

The new company, to be named prior to the transaction’s closing, combines potash, nitrogen and phosphate production assets with an agricultural retail network. The new company will have close to 20,000 employees, operations and investments in 18 countries, and a pro forma enterprise value of US$36 billion, based on each company’s net debt as of June 30, 2016 and the current shares outstanding and respective closing share prices of the companies on the NYSE on Aug. 29, 2016. On a 2015 pro forma basis, the new company would have had net revenue of approximately US$20.6 billion and EBITDA of US$4.7 billion before synergies.

PotashCorp President and Chief Executive Officer Jochen Tilk said, “Our merger creates a new premier Canadian-headquartered company that reflects our shared commitment to creating value and unlocking growth potential for shareholders. The integrated platform established through our combination will greatly benefit customers and suppliers, and support even greater career development opportunities for employees. Our workforce and the communities in which we operate are critical to both PotashCorp and Agrium, and we intend to carry forward best practices from both companies in corporate social responsibility, including commitments to employees, operating communities and the environment.”

Agrium President and Chief Executive Officer Chuck Magro said, “This is a transformational merger that creates benefits and growth opportunities that neither company could achieve alone.  Combining our complementary assets will enable us to serve our customers more efficiently, deliver significant operating synergies and improve our cash flows to provide capital returns and invest in growth.”

Related: Agrium drops most since June after cutting 2016 profit outlook

Leadership

Upon closing of the transaction, Jochen Tilk will serve as executive chairman, and Chuck Magro will serve as chief executive officer, both reporting to the new board of directors. Wayne Brownlee will serve as chief financial officer, and Steve Douglas will serve as chief integration officer. The new company’s board of directors will have equal representation. The board’s independent lead director will be designated by Agrium.

Following the closing of the transaction, the new company will have its registered head office in Saskatoon, with Canadian corporate offices in both Calgary and Saskatoon.

Canpotex

The new company will remain committed to Canpotex, the global logistics and marketing company that provides efficient and cost-effective distribution to many of the world’s fastest growing potash markets.

Tax treatment

Canadian taxable resident shareholders will be able to elect that they receive shares in the new company free of Canadian income taxes, and other shareholders will generally not be subject to Canadian income tax. It is expected that U.S. resident shareholders will generally receive shares in the new company on a tax-deferred basis for U.S. federal income tax ‎purposes.

Timing and approvals

The transaction is expected to close during mid-2017, subject to the satisfaction of customary closing conditions, including receipt of regulatory approvals, Canadian court approval, and approval by the shareholders of both companies.

Advisors

Barclays Capital Inc. and CIBC Capital Markets are serving as financial advisors, and Blake, Cassels & Graydon LLP, Norton Rose Fulbright Canada LLP, Paul, Weiss, Rifkind, Wharton & Garrison LLP, and Latham & Watkins LLP are serving as legal advisors to Agrium.

BofA Merrill Lynch and RBC Capital Markets are serving as financial advisors, and Stikeman Elliott LLP and Jones Day are serving as legal advisors to PotashCorp.

Morgan Stanley & Co. LLC is serving as joint financial advisor to Agrium and PotashCorp.

Related: Potash Corp., Agrium in talks on potential merger

Source: Potash Corp.

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