PotashCorp, Agrium 'merger of equals' gains Chinese competition consent

VANCOUVER (miningweekly.com) – The merger of Potash Corporation of Saskatchewan and Agrium Inc has received the thumbs up from the Chinese Ministry of Commerce.

Billed as a 'merger of equals', the business combination will create a new $36-billion entity, to be named Nutrien. The transaction is working its way through the regulatory review and approval process in several jurisdictions.

The Chinese Commerce Ministry attached conditions to its decision, most notably that the parties commit to divest PotashCorp's minority shareholdings in Arab Potash Company and Sociedad Quimica y Minera de Chile (SQM) within 18 months, and Israel Chemicals within 9 months, from the closing of the transaction. The companies are allowed to consummate the merger before the divestments.

The approval is also conditional on the commitment to convert PotashCorp's equity interest in Sinofert Holdings to a passive investment before closing the merger and ensuring that the potash marketing and distribution arm, Canpotex, remains a stable, reliable and dedicated supplier to China.

The companies have now received clearance for the merger in Brazil, Canada, China, India and Russia. The regulatory review and approval process continues in the US and the parties expect to close the transaction before year-end.

Agrium also announced on Tuesday that is had agreed to sell its Conda, Idaho, phosphate production facility and adjacent phosphate mineral rights to TSX-V-listed Itafos for $100-million, including working capital.

Agrium has also entered into a definitive agreement with Trammo Nitrogen Products, a subsidiary of Trammo Inc, to sell its North Bend, Ohio, nitric acid facility.

The Conda facility and related assets include all of Agrium's superphosphoric acid (SPA) business in North America, while the North Bend facility represents the entirety of Agrium's nitric acid business in the Midwest region. These divestitures are intended to address US regulatory concerns raised regarding the merger transaction and are subject to the US Federal Trade Commission's approval.

"The divestment of these assets will help pave the way for our merger with PotashCorp and the excellent line of sight to capture $500-million in annual synergies. With Itafos operating the SPA business and Trammo operating the nitric acid business, farmers and industrial customers will be served across the US for many years to come," stated Agrium president and CEO Chuck Magro.

As part of the sale of the Conda business, Agrium and Itafos will enter into long-term strategic supply and offtake agreements as part of the transaction, under which Agrium will supply all of the ammonia requirements of the Conda Phosphate Operations and will buy 100% of the monoammonium phosphate product produced, with pricing formulas for both tied to benchmark phosphate fertiliser prices.

Agrium is expected to record a non-cash impairment of $178-million, net of tax (gross of tax $295-million), in connection with the sale of Conda and will retain the historical environmental obligations.

Q3 RESULTS
After market close on Tuesday, Agrium reported a bigger-than-expected third-quarter loss as dry weather in Australia and Canada dampened demand for its plant fertiliser products.

The company pared its full-year forecast for earnings per share from continuing operations to between $4.65 and $4.80, from its previous estimate of $4.75 to $5.25, as dry weather is expected to persist in Australia and parts of agricultural bigwig Brazil.

Expenses rose 4.5% on the back of maintenance turnarounds at the company's production facilities and higher natural gas input costs.

The company's net loss increased to $251-million, or $1.84 a share, from $39-million, or $0.29 a share, a year earlier. Excluding special items, the company lost $0.23 a share, significantly higher than the loss of $0.04 a share forecast by analysts.