Largest Crop Nutrient Company in the World and
3rd Largest Natural Resource Company in Canada
Pre-eminent, Low-Cost Producer of Potash and
High-Quality Nitrogen and Phosphate, Integrated with Leading Global
Retail Distribution Platform
New Company Better Positioned to Serve
Customers and Farmers with Low-Cost, High-Value Products and
Services, with Continued Emphasis on Efficiency and
Innovation
Expected to Generate up to US$500 Million of Annual Operating
Synergies
Strong Pro Forma Balance Sheet with
Substantial Cash Flow to Provide Flexibility to Return Excess
Capital to Shareholders and Invest in Growth, While Maintaining
Strong Credit Ratings
Registered Head Office in Saskatoon, With Canadian Corporate Offices in
Both Calgary and Saskatoon;
Combined Workforce to Reflect Strengths and Capabilities of Both
Companies;
Committed to Customers and Local
Communities
CALGARY and SASKATOON, Sept. 12,
2016 /CNW/ - Agrium Inc. (TSX: AGU) (NYSE: AGU) and Potash
Corporation of Saskatchewan Inc. (PotashCorp) (TSX: POT) (NYSE:
POT) today announced that they have agreed to combine in a merger
of equals to create a world-class integrated global supplier of
crop inputs.
Under the agreement, which the Boards of Directors of both
companies unanimously approved, a new parent company will be formed
to own both companies. PotashCorp shareholders will receive 0.400
common shares of the new company for each common share of
PotashCorp they own, and Agrium shareholders will receive 2.230
common shares of the new company for each common share of Agrium
they own. The exchange ratios represent the exchange ratios of the
two companies at market close on the NYSE on August 29, 2016 the last trading day prior to
when the companies announced that they were in preliminary
discussions regarding a merger of equals, which is consistent with
the approximate 10 day and 60 day volume weighted average prices
through that date. Following the close of the transaction,
PotashCorp shareholders will own approximately 52 percent of the
new company, and Agrium shareholders will own approximately 48
percent on a fully diluted basis.
The new company, to be named prior to the transaction's closing,
combines low-cost, world-class potash and high-quality nitrogen and
phosphate production assets with a premier agricultural retail
network to forge an integrated crop inputs platform to better serve
customers. The new company will be a leader in the fertilizer
industry with 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 August 29,
2016. On a 2015 pro forma basis, the new company would have
had net revenue of approximately US$20.6
billion and EBITDA of US$4.7
billion before synergies.
PotashCorp President and Chief Executive Officer Jochen Tilk said, "Our merger creates a new
premier Canadian-headquartered company that reflects our shared
commitment to creating value and unlocking growth potential for
shareholders. The integrated platform established through our
combination will greatly benefit customers and suppliers, and
support even greater career development opportunities for
employees. Our workforce and the communities in which we
operate are critical to both PotashCorp and Agrium, and we intend
to carry forward best practices from both companies in corporate
social responsibility, including commitments to employees,
operating communities and the environment."
Agrium President and Chief Executive Officer Chuck Magro said, "This is a transformational
merger that creates benefits and growth opportunities that neither
company could achieve alone. Combining our complementary
assets will enable us to serve our customers more efficiently,
deliver significant operating synergies and improve our cash flows
to provide capital returns and invest in growth."
Strategic and Financial Benefits of the Merger
- Pre-eminent, low-cost producer of potash and high-quality
nitrogen and phosphate: The new company will have a balanced
nutrient portfolio that includes world-class potash production and
complementary high-quality nitrogen and phosphate operations. It
will have the lowest-cost potash production assets and reserves in
North America, and a meaningful
platform to benefit from continued growth in global potash demand.
The merger also results in more diversified and complementary
geographic and product portfolios in nitrogen and phosphate, with
the North American nitrogen business expected to continue to
benefit from low-cost feedstock and local distribution.
- Leading retail distribution platform combined with two
world-class nutrient production platforms: The new company will
have a retail distribution platform encompassing crop nutrients and
other input products, services, and solutions with operations in
seven countries. The company will continue to emphasize innovation
and growth in proprietary products, grower services, and
distribution, with customers and suppliers benefiting from a broad
agricultural solutions offering. The combined production footprint
will drive freight savings and other operational efficiencies.
- Significant value creation from synergies: The
combination is expected to generate up to US$500 million of annual operating synergies
primarily from distribution and retail integration, production and
SG&A optimization, and procurement. The synergies imply value
creation for the combined enterprise of up to US$5 billion, or a 20 percent increase above the
combined market capitalizations on August
29, 2016. The all-stock nature of the transaction allows all
shareholders to participate in the benefits of the combination. The
new company is expected to achieve approximately US$250 million of these synergies by the end of
the first year after closing with the full run-rate achieved by the
end of the second year. The transaction is expected to be accretive
for both sets of shareholders with run-rate synergies.
- Compelling growth opportunities: Recently completed
investments in new, low-cost capacity, particularly in potash, will
improve the new company's operating costs and position it well to
respond to increases in demand. Continuing to grow the retail
business will also be a priority, including roll-up opportunities,
new store openings, and innovation in products and services to
better serve growers.
- Strong balance sheet with significant cash flow
generation: On a 2015 pro forma basis, inclusive of expected
synergies, the new company would have had operating cash flow of
over US$4 billion. With major
capacity expansion projects essentially complete at each company,
the new company's low financial leverage, and significant cash flow
generation, the combined company will have flexibility to return
excess capital to shareholders and invest in growth initiatives,
while also maintaining a strong investment grade credit rating
profile. Both companies expect to maintain their existing dividend
payments until the transaction is completed. Following the closing
of the transaction, the new company will target a stable and
growing dividend that reflects the strengthened cash flow profile
of the combined company. Subject to market conditions and Board
approval at the time of closing, the new company expects to
establish a dividend payment equal to the current Agrium level,
adjusted for the new share count.
Leadership and Communities
The new company will be led by a proven team that reflects the
strengths and capabilities of both companies. Upon closing of
the transaction, Jochen Tilk will
serve as Executive Chairman, and Chuck
Magro will serve as Chief Executive Officer, both reporting
to the new Board of Directors. Wayne
Brownlee will serve as Chief Financial Officer, and
Steve Douglas will serve as Chief
Integration Officer. Additional senior leadership positions for the
new company will be named at a later date. The new company's
Board of Directors will have equal representation. The Board's
independent Lead Director will be designated by Agrium.
In addition to leading the Board of Directors, the Executive
Chairman will have executive responsibility for the new company's
business strategy function.
Following the closing of the transaction, the new company will
have its registered head office in Saskatoon, with Canadian corporate offices in
both Calgary and Saskatoon.
In addition to maintaining a strong workforce in each of its
operations, the new company will maintain its commitments to
community involvement and investment.
Canpotex
The new company will remain committed to Canpotex, the global
logistics and marketing company that provides efficient and
cost-effective distribution to many of the world's fastest growing
potash markets.
Tax Treatment
Canadian taxable resident shareholders will be able to elect
such that they receive shares in the new company free of Canadian
income taxes, and other shareholders will generally not be subject
to Canadian income tax. It is expected that U.S. resident
shareholders will generally receive shares in the new company on a
tax-deferred basis for U.S. federal income tax purposes.
Timing and Approvals
The transaction will be implemented by way of a plan of
arrangement under the Canada Business Corporations Act. It is
expected to close during mid-2017, subject to the satisfaction of
customary closing conditions, including receipt of regulatory
approvals, Canadian court approval, and approval by the
shareholders of both companies.
Advisors
Barclays Capital Inc. and CIBC Capital Markets are serving as
financial advisors, and Blake, Cassels & Graydon LLP, Norton
Rose Fulbright Canada LLP, Paul, Weiss, Rifkind, Wharton &
Garrison LLP, and Latham & Watkins LLP are serving as legal
advisors to Agrium.
BofA Merrill Lynch and RBC Capital Markets are serving as
financial advisors, and Stikeman Elliott LLP and Jones Day are serving as legal advisors to
PotashCorp.
Morgan Stanley & Co. LLC is serving as joint financial
advisor to Agrium and PotashCorp.
Analyst/Investor Conference Call and Webcast
A joint conference call and webcast will be held today at
8:30 a.m. ET (6:30 a.m. MT) to discuss the combination.
The conference call can be accessed by dialing (866) 610-1072
within the U.S. and (973) 935-2840 for all other locations. The
confirmation code is 78572955. Participants should dial in 10
minutes prior to the scheduled start time.
A live webcast of the conference call and associated
presentation materials will be available on the investor relations
section of each company's website at www.agrium.com and
www.potashcorp.com, as well as at
www.worldclasscropinputsupplier.com, a new joint website dedicated
to the merger.
A replay of the conference call will be available approximately
two hours after completion of the conference call through
September 26, 2016 and can be
accessed by dialing (800) 585-8367 from the U.S. or (404) 537-3406
from outside the U.S. The replay confirmation code is 78572955. The
webcast will be archived on the investor relations section of each
company's websites.
About Agrium
Agrium Inc. is a major global producer and distributor of
agricultural products, services and solutions. Agrium produces
nitrogen, potash and phosphate fertilizers, with a combined
wholesale nutrient capacity of over nine million tonnes and with
significant competitive advantages across our product lines. We
supply key products and services directly to growers, including
crop nutrients, crop protection, seed, as well as agronomic and
application services, thereby helping growers to meet the ever
growing global demand for food and fibre. Agrium
retail-distribution has an unmatched network of over 1,400
facilities and over 3,800 crop consultants who provide advice and
products to our grower customers to help them increase their yields
and returns on hundreds of different crops. With a focus on
sustainability, the company strives to improve the communities in
which it operates through safety, education, environmental
improvement and new technologies such as the development of
precision agriculture and controlled release nutrient products.
Agrium is focused on driving operational excellence across our
businesses, pursuing value-enhancing growth opportunities and
returning capital to shareholders. For more information visit:
www.agrium.com
About PotashCorp
PotashCorp is the world's largest crop nutrient company and
plays an integral role in global food production. The company
produces the three essential nutrients required to help farmers
grow healthier, more abundant crops. With global population rising
and diets improving in developing countries, these nutrients offer
a responsible and practical solution to meeting the long-term
demand for food. PotashCorp is the largest producer, by capacity,
of potash and one of the largest producers of nitrogen and
phosphate. While agriculture is its primary market, the company
also produces products for animal nutrition and industrial uses.
Common shares of Potash Corporation of Saskatchewan Inc. are listed
on the Toronto Stock Exchange and the New York Stock Exchange.
Forward-Looking Statements
Certain statements and other information included in this press
release constitute "forward-looking information" or
"forward-looking statements" (collectively, "forward-looking
statements") under applicable securities laws. All statements in
this press release, other than those relating to historical
information or current conditions, are forward-looking statements,
including, but not limited to, statements as to Agrium and
PotashCorp management's expectations with respect to: the proposed
combination of Agrium and PotashCorp (the "transaction") under a
new parent company, including the new company's assets, cost
structure, financial position, cash flows and growth prospects; the
anticipated benefits and synergies of the transaction, including
strategic and integration opportunities; governance matters
relating to the new company; expectations regarding the new
company's dividends; and certain combined operational, financial
and other information and projections. This press release also
contains forward-looking statements regarding the anticipated
completion of the transaction and timing thereof. The combined
and/or pro forma information included in this press release does
not reflect what the actual financial and operational results would
necessarily have been had Agrium and PotashCorp operated as a
single combined entity for the periods presented, and such
information does not purport to project the new company's financial
results and results of operations for any future period.
Forward-looking statements in this press release are based on
certain key expectations and assumptions made by Agrium and
PotashCorp, including expectations and assumptions concerning:
customer demand for the new company's products; commodity prices
and interest and foreign exchange rates; planned synergies, capital
efficiencies and cost-savings; applicable tax laws; future
production rates; future debt ratings; the sufficiency of budgeted
capital expenditures in carrying out planned activities; the
availability and cost of labour and services; and the receipt, in a
timely manner, of regulatory, stock exchange, shareholder and
Canadian court approvals in respect of the transaction. Although
Agrium and PotashCorp believe that the expectations and assumptions
on which such forward-looking statements are based are reasonable,
undue reliance should not be placed on the forward-looking
statements because Agrium and PotashCorp can give no assurance that
they will prove to be correct.
Forward-looking statements are subject to various risks and
uncertainties which could cause actual results and experience to
differ materially from the anticipated results or expectations
expressed in this press release. The key risks and uncertainties
include, but are not limited to: general global economic, market
and business conditions; weather conditions including impacts from
regional flooding and/or drought conditions; crop plant area, yield
and prices; the supply and demand and price levels for major
products of Agrium and PotashCorp may vary from what we currently
anticipate; governmental and regulatory requirements and actions by
governmental authorities, including changes in government policy,
government ownership requirements, changes in environmental, tax
and other laws or regulations and the interpretation thereof, and
political risks, including civil unrest, actions by armed groups or
conflict, regional natural gas supply restrictions as well as
counterparty and sovereign risk; relationships with employees,
customers, business partners, and competitors; delays in completion
of turnarounds at Agrium and PotashCorp major facilities; diversion
of management time on the transaction; and other risk factors
detailed from time to time in Agrium and PotashCorp reports filed
with the Canadian securities regulatory authorities and the United
States Securities and Exchange Commission. There are also risks
that are inherent in the nature of the transaction, including:
failure to realize anticipated synergies or cost savings; risks
regarding the integration of the two entities; incorrect
assessments of the values of the other entity; and failure to
obtain any required regulatory and other approvals (or to do so in
a timely manner). The anticipated timeline for completion of the
transaction may change for a number of reasons, including the
inability to secure necessary regulatory, stock exchange, Canadian
court or other approvals in the time assumed or the need for
additional time to satisfy the conditions to the completion of the
transaction. As a result of the foregoing, readers should not place
undue reliance on the forward-looking statements contained in this
press release concerning the timing of the transaction.
Agrium and PotashCorp disclaim any intention or obligation to
update or revise any forward-looking statements in this press
release as a result of new information or future events, except as
may be required under applicable U.S. federal securities laws or
applicable Canadian securities legislation.
Additional Information and Where to Find It
Additional information about Agrium and PotashCorp can be found
under their respective corporate profiles on SEDAR at www.sedar.com
or on EDGAR at www.sec.gov, respective websites at www.agrium.com
and www.potashcorp.com, or by contacting the contacts
below.
No Merger Solicitation
This press release is not intended as, and does not constitute,
a solicitation of proxies or votes in connection with the requisite
Agrium securityholders and PotashCorp shareholders' approval of the
transaction. A joint information circular of Agrium and PotashCorp
describing details of the transaction, the new company and other
information, including with respect to tax consequences of the
transaction to Agrium securityholders and PotashCorp shareholders,
is expected to be mailed to Agrium securityholders and PotashCorp
shareholders in connection with the respective shareholder meetings
to approve the transaction in early October
2016. The record date for the shareholder meetings will be
September 22, 2016, and the date of
each of the meetings will be November 3,
2016.
SOURCE Potash Corporation of Saskatchewan Inc.