Under terms of the transaction, 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 New York Stock Exchange 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. 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 strategic and financial drivers of the merger are compelling,” Charles Magro, president and chief executive officer of Agrium, said during a Sept. 12 conference call with analysts. “The combined company will be the largest crop nutrient company in the world and the third largest natural resource company in Canada. We will have close to 20,000 employees, and operations and investments in 18 countries.”
Magro said the new company will have a $36 billion enterprise value and a $26 billion market cap.
“The new company will be a low-cost, world-class producer of key crop nutrients, including having the lowest cost potash production assets and reserves in North America,” he said. “It will also benefit from a low-cost North America nitrogen platform, and a diverse phosphate product portfolio. As a complement to this nutrient portfolio, the new company will have a leading retail distribution platform encompassing crop nutrients and other input products, services, and solutions with operations in seven countries.”
Another important benefit of the transaction is an expected $500 million in annual operating synergies that the combined companies may create.
“These synergies will come primarily from distribution and retail integration and optimization, production and SG&A optimization, and procurement,” said Jochen Tilk, president and CEO of PotashCorp. “Notably, the majority of the savings are unrelated to headcount. Let me emphasize teams from both PotashCorp and Agrium have taken a hard look at these numbers. We are confident that these synergies are achievable and in the value creation we are describing today. We expect to achieve approximately $250 million of these synergies by the end of the first year of the closing, with the full run rate achieved by the end of the second year.”
Upon closing of the transaction, Tilk will become executive chairman, leading the board and having executive responsibility for the company’s business strategy function, while Magro will become CEO. Wayne Brownlee will become the new company’s chief financial officer, and Steve Douglass will take on the role of chief integration officer.
Based in Calgary, Alberta, Canada, Agrium Inc. is a global producer and distributor of agricultural products, services and solutions. The company produces nitrogen, potash and phosphate fertilizers, with a combined wholesale nutrient capacity of over 9 million tonnes. The company supplies products and services directly to growers, including crop nutrients, crop protection, seed, as well as agronomic and application services. Agrium’s retail-distribution has a network of more than 1,400 facilities and over 3,800 crop consultants who provide advice and products to grower customers to help them increase their yields and returns on hundreds of different crops.
Based in Saskatoon, Saskatchewan, PotashCorp is the world’s largest crop nutrient company, and is the largest producer, by capacity, of potash and one of the largest producers of nitrogen and phosphate. While agriculture is its primary market, the company also produces products for animal nutrition and industrial uses.