Merger rumor: Agrium+PotashCorp

Bloomberg broke news today of a potential merger between Agrium and PotashCorp:

The combination could be announced as soon as next week, the people said, asking not to be identified because the deliberations are private. No final decisions have been made and the Canadian companies could decide against a deal, they said.

Within a couple hours, PotashCorp put out a press release in which it “confirmed that it is in preliminary discussions with Agrium Inc … regarding a potential merger of equals,” and again making clear that no decisions have yet been made.

Both companies have extensive business beyond ammonia: according to their 2015 Annual Reports, the amount of each company’s business represented by the Nitrogen segment was 31% for PotashCorp (“contribution to gross margin,” PDF) and 39% for Agrium (“Percentage of 2015 EBITDA,” PDF).

Nonetheless, their combination would change the ammonia landscape significantly.

North America’s market share in 2017, measured by ammonia capacity, will look like this if no merger takes place (this chart forecasts that all the plants currently under construction will be online next year, and the slated spin-offs take place):
201608 agu-pot fail

However, if the Agrium-PotashCorp merger succeeds, market share will shift like this:
201608 agu-pot succeed

Please note, these charts do not include assets in Trinidad & Tobago, where CF, PotashCorp, Koch, and Yara all have significant additional ammonia capacity.

Leave a Reply

Your email address will not be published. Required fields are marked *