CEO shuffle could yield M&A, say investors

• Investors expect the new chief executive of Canada’s Nutrien Ltd. to swing deals as part of a more aggressive growth strategy, after an abrupt shakeup at Canada’s biggest agriculture company.

Nutrien, the world’s biggest fertilizer producer by capacity, surprised shareholders on Sunday by promoting its chairman, Mayo Schmidt, to CEO, replacing Chuck Magro, who had led the company since it formed from Agrium’s 2018 merger with Potash Corp.

Schmidt, raised on a Kansas farm, is best known for leading the Saskatchewan Wheat Pool grain co-operative’s acquisition of competitor Agricore United in 2007, creating Viterra Inc., one of Canada’s biggest grain handlers. He subsequently bought Australia’s ABB Grain before leading the sale of Viterra to commodity trader Glencore PLC in 2012.

“Acceleration of M&A is a natural progression as we enter the next commodity supercycle,” said Michael Underhill, chief investment officer at Capital Innovations LLC, which owns Nutrien shares. “I would not bet against him.”

Nutrien shares were down 1.3 per cent on Tuesday, after falling 3.5 per cent on Monday. They have risen about 35 per cent year-over-year, riding soaring corn prices, but gained only 2 per cent since they began trading in 2018.

Some investors had grown uncertain about Nutrien’s growth strategy under Magro, said Mike Archibald, vice-president and portfolio manager at AGF Investments, which owns C$136 million ($109 million) worth of the company’s stock.

Archibald said now the strategy looks likely to shift to deals.

“The incoming CEO does have a history as a deal-maker so, to the extent he lives up to what he’s done in the past, we should expect sometime in the next 12 months that we’ll get something happening on the M&A front,” Archibald said.

Nutrien could try to acquire U.S. nitrogen fertilizer rival CF Industries, which has a $10-billion market capitalization, or accelerate the company’s roll-up of smaller farm retail stores, Archibald said.

Conversely, Schmidt could sell off the retail business to focus on fertilizer production, Archibald said.

Schmidt could also eye selling Nutrien’s phosphate fertilizer business, even though it recently got a boost from U.S. duties against Russian and Moroccan imports, said Brian Madden, senior vice-president at Goodreid Investment Counsel, a Nutrien shareholder.

The CEO change is positive, as Schmidt has an exceptional record of creating shareholder value, said Scotiabank analyst Ben Isaacson. He added that Nutrien could look to consolidate the nitrogen industry.