Proposed Potash-Agrium merger puzzles analysts – by Natalie Obiko Pearson (Globe and Mail/Bloomberg – September 9, 2016)

http://www.theglobeandmail.com/

Over the last three years, Potash Corp. of Saskatchewan Inc., Canada’s giant fertilizer producer, has scrapped two blockbuster deals proposed by two different leaders. Now Jochen Tilk is circling a third with Agrium Inc.

The question analysts are asking is: Why?

“You can come up with a rationale if you try hard enough, but it’s still kind of puzzling,” said Neil Fleishman, head of research at Green Markets, a unit of Bloomberg BNA. “It seems like a move just to make a move.”

Potash Corp. and Agrium, based in Calgary, said last month they’re in talks to merge one of the world’s largest producers of potash, a commonly used fertilizer for hundreds of years, with a farm supply retailer. If they agree, the deal would be substantial: Potash Corp. was valued at $14.8-billion (U.S.) as of the end of trading Tuesday, while Agrium sat at $13.3-billion.

Such an agreement would allow Potash Corp. to diversify its mining business with Agrium’s 1,400 retail outlets across seven countries. Yet it may do little to reverse a 34-per-cent decline in potash prices over the past year, sparked by oversupply, the crumbling of a global export system that had supported prices for decades, and tepid demand from places such as China.

“This isn’t a blockbuster deal that would make potash prices soar overnight,” Mr. Fleishman said by telephone.

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