Potash Corp. of Saskatchewan Inc. and Agrium Inc. said that they are in preliminary talks to merge, as the two Canadian companies grapple with weak fertilizer prices and a glut of potash in the market.
The companies said no agreement has been reached and there was no guarantee that the discussions would lead to a deal. Talk of a merger comes as the oversupply of potash has crimped corporate profits and given buyers such as China the upper hand.
Potash Corp. has seen prices for potash plunge to $154 (U.S.) a tonne in the second quarter from $273 last year. Its other two products, nitrogen and phosphate, have also lost value. This is the second time Potash Corp.’s relatively new CEO, Jochen Tilk, has tried to consolidate the fertilizer industry since taking over as chief executive in 2014.
Under Mr. Tilk’s leadership, the company tried to acquire Germany’s K+S AG in an $8.7-billion deal last year. But Mr. Tilk eventually killed the proposal in October, citing the weaker commodities markets and accusing K+S of not co-operating.
Since then, Potash Corp. has sliced its dividend twice, closed a mine in New Brunswick and slashed its profit outlook for the year. Agrium has reported weaker earnings because of the falling prices. One analyst said a merger would benefit both companies, as Agrium’s dominant business is nitrogen and Potash Corp.’s is potash.
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