Potash, Agrium merger moves toward final hurdles

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More than a year in the making, the merger of Potash Corp. of Saskatchewan Inc. and Agrium Inc. looks to be inching to completion.

India – one of several countries with a say in the tie-up of two Canadian-based fertilizer producers – gave its blessing last week, on the condition some minority international interests are put on the block.

The country's competition regulator agreed to the deal providing Potash sells its stakes in Arab Potash Co., Israel Chemicals Ltd. and Sociedad Quimica y Minera de Chile SA within 18 months. The companies can close their deal before divesting the assets, which are estimated to be worth more than $5-billion (U.S.).

That's a key step, but not the last one before the companies merge to create Nutrien, a manufacturing, wholesale and retail business with an enterprise value of $36-billion.

Still needed are approvals from China and the United States. China is believed to be insisting on the divestiture of just one of the global interests, so India's insistence on the three bodes well for a quick approval decision, said John Chu, an analyst at Laurentian Bank Securities.

Agrium spokesman Richard Downey said talks with Chinese authorities are in the late stages. "We do feel we're making good progress on the Chinese side," he said.

It's been a marathon, and investors have struggled with volatility in their holdings. It shows the complexity of trying to put together the world's largest crop nutrient company, with assets in numerous jurisdictions and which harbour competition concerns.

Confidence about completion has grown, however. Since the start of September, both stocks have climbed 13 per cent.

Saskatoon-based Potash and Agrium of Calgary announced their deal in 2016 amid stagnation in global commodity markets, with the promise of $500-million in annual cost savings.

In September, the pair said the close of the transaction would be delayed for another few months to the end of this year, as regulators in several countries assessed potential concentration in their agricultural markets. Since then, Canada, Brazil and Russia have cleared the merger without conditions.

Now, the companies are assessing potential sales of two production facilities to win U.S. Federal Trade Commission approval. An Ohio nitric acid plant and an Idaho superphosphoric acid facility are being considered for divestiture, Mr. Downey said. The products are used in fertilizer as well as other industrial products.

Unloading the two plants would not be problematic for Potash and Agrium, Laurentian's Mr. Chu wrote in a note to clients.

Potash is scheduled to issue its third-quarter results report on Oct. 26, and Agrium on Nov. 7.