Regulatory hurdles delay PotashCorp merger

M&A

• The friendly merger of PotashCorp and Agrium Inc. i s now expected to close several months later than the previous target date due to concerns raised by regulatory bodies in four countries.

The two Canadian fertilizer producers say they have made progress on the approval process in all jurisdictions, but the deal likely won’t close until the end of the year, rather than midyear as originally expected.

When the deal was announced last September, it was estimated the combined company would have an enterprise value of US$ 36 billion by joining PotashCorp’s extensive mining operations with Agrium’s mining and global retail network.

The scale of the combined company has led authorities in China and India to ask PotashCorp to sell off some of its investments, which include minority stakes in Sinofert — China’s largest potash producer — as well as in Israel Chemicals Ltd., Chile- based SQM and Jordan-based Arab Potash Company.

“It’s a pretty complex process overall, and it is in multiple jurisdictions, so there’s just a lot of back and forth between the different agencies,” PotashCorp spokesman Bill Cooper said of the delay.

Cooper said details are still being worked out, but approval from China and India is important since they are such a significant customer base.

The two countries account for almost half of global nitrogen consumption and more than 40 per cent of phosphate use, while Asia as a whole takes up 48 per cent of potash production.

The Canadian Competition Bureau and U. S. Federal Trade Commission have also raised concerns about the potential concentration of suppliers, especially in the superphosphoric acid and nitric acid markets.

Agrium spokesman Richard Downey said U. S. authorities may require the company to sell a small nitric facility in Ohio, as well as its sizable Conda phosphate plant in Idaho to resolve concerns.

“There was a s mall enough number of other suppliers in the market that it caused economist pause,” Downey said.

PotashCorp and Agrium s ay t he proposed s al es aren’t expected to affect the $ 500 million in annual savings from operational efficiencies they expect from the merger.