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

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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