CALGARY — Potash Corp. of Saskatchewan, the world’s largest fertilizer company by capacity, and Calgary-based Agrium have confirmed they are in preliminary merger talks.
Both companies issued statements today confirming the news after their shares were halted on the Toronto Stock Exchange.
They said no agreement has been reached and there is no assurance that any transaction will result from these discussions.
Before the companies’ shares were halted, PotashCorp stock had climbed $2.40 or 11.48 per cent to $23.30 on the day and Agrium was up $8.28 or 7.1 per cent to $124.81.
The rise in share prices made PotashCorp worth $19.6 billion and Agrium worth $17.4 billion, creating the potential for a $37 billion agricultural giant.
The merger talks come as the fertilizer industry struggles with a steep drop in prices in recent years following a ramp-up in production and the breakup of a Russia-Belarusian potash trading cartel in 2013.
Potash producers have responded to the price drop by cutting production, with PotashCorp going so far as to shutter its recently opened Picadilly mine in New Brunswick in January, putting 430 people out of work.
The industry has looked for consolidation in the past, with PotashCorp pushing for a US$8.7 billion takeover of K+S Group last year that was rebuffed by the German fertilizer group.
PotashCorp was itself the target of a US$38.6 billion takeover bid by BHP Billiton in 2010, but the Canadian government ultimately blocked the offer as not having enough net benefit for Canada.
The Saskatchewan government formed PotashCorp in 1975 as a Crown corporation. The company was privatized in 1989.
Agrium, a major producer of agricultural products including potash, was founded in 1931.