Canada's Agrium and Potash Corp of Saskatchewan said they would combine, a deal that would create a fertilizer and farm retailing giant with proforma enterprise value of $36 billion but also trigger U.S. regulatory scrutiny.
Potash Corp, the world's biggest crop nutrient company by capacity and Agrium, North America's largest farm retailer, said the combined company will be largest crop nutrient company in the world and third largest natural resource company in Canada.
The companies had said on Aug. 30 that they were in talks to merge. The merger will create a company dominant in North America, controlling nearly two-thirds of potash capacity, 30 percent of phosphate production capability and 29 percent of nitrogen capacity, National Bank analyst Greg Colman had said at the time.
The deal would be the latest in a string of agriculture merger attempts, including potential combinations of seed giants Monsanto and Bayer, and ChemChina and Syngenta.
Fertilizer companies have suffered lower profits as crop nutrient prices tumbled due to excessive supply and weak demand. Crop prices have also been hurt, with corn and wheat at seven-year and 10-year lows respectively, giving farmers less incentive to maximize production with fertilizer.
Potash Corp shareholders will get 0.400 common shares of the combined company for each share they hold and Agrium shareholders will get 2.230 common shares for each share they own, the companies said on Monday.
Potash Corp U.S.-listed shares were up slightly at $17.03 in light premarket trading. Agrium U.S.-listed shares, which closed at $95.21 on Friday, were untraded.
Potash Corp shareholders will own about 52 percent of the new company, with Agrium shareholders owning the rest after the deal closes, which is in mid-2017.
The combined company would have had 2015 net revenue of about $20.6 billion and earnings before interest, taxes, depreciation and amortization (EBITDA) of $4.7 billion before synergies, on a proforma basis, the companies said.
The companies expect annual operating synergies of up to $500 million from the merger.
Agrium Chief Executive Chuck Magro will lead the combined company. Potash Corp CEO Jochen Tilk will be its executive chairman.
Barclays Capital and CIBC Capital Markets are Agrium's financial advisers, while Band of America/Merrill Lynch and RBC Capital Markets are Potash Corp's financial advisers.
Morgan Stanley is serving as joint financial adviser to Agrium and Potash Corp. Stikeman Elliott and Jones Day are serving as legal advisers to Potash Corp. Agrium's legal advisers are Blake, Cassels & Graydon, Norton Rose Fulbright Canada, and Paul, Weiss, Rifkind, Wharton & Garrison, and Latham & Watkins.