Spike in AN and ammonia prices lifts PWNI values even higher
Earlier this week PotashCorp and Agrium announced that they have agreed stock-only merger terms that will create the largest crop nutrient company in the world. As yet unnamed, the new company will have a potash capacity of 20m tonnes per year (all figures nameplate basis) by the time it starts combined operations in mid-2017. This potash capacity figure includes 17m tpa in nameplate capacity from five PotashCorp mines and 3m tpa from one Agrium potash operation.
The agreement has been approved unanimously by Boards of Directors of both companies and will see a new parent company formed. This new company, to be named prior to the transaction’s closing, will have a registered head office in Saskatoon, with Canadian corporate offices in Calgary and Saskatoon. It will have close to 20,000 employees, operations and investments in 18 countries, and a pro forma enterprise value of US$36 billion, based on each company’s net debt as of June 30, 2016 and the current shares outstanding and respective closing share prices of the companies on the NYSE on 29 August 2016.
At present, global potash and phosphates sectors are facing multi-year price lows and big new capacity startups due around the corner in 2017. The merger will have a clear impact on global markets, but further detail is awaited on how the new company’s output portfolio could be optimised or rationalised. Both regulatory and competition issues will need to be addressed and have been raised by farmer’s groups in the media.
The current issue of Profercy Potash dedicates 2 inside pages to key aspects of the PotashCorp, Agrium merger, looking at both companies’ potash capacity positions, and how they fit into the big Saskatchewan MOP capacity boost panorama due by late 2017. It also touches on scope for both companies to rationalise the proposed new company’s P assets.
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