How investors should play the proposed Agrium-Potash Corp. merger – by Brenda Bouw (Globe and Mail – September 15, 2016)

The $36-billion (U.S.) combination of Agrium Inc. and Potash Corp. of Saskatchewan Inc. has been touted as a “merger of equals,” but shareholders of each company are still scratching their heads about how they might benefit. The deal offers no premium, but a promised half billion dollars in combined savings at a time when companies are looking to cut costs as potash prices remain depressed due to global oversupply.

Shares in each company have fallen about 6 per cent since the merger was officially announced on Sept. 12, suggesting market skepticism. At least one Agrium shareholder says the company could face a backlash from investors since the deal exposes them to more volatile fertilizer markets.

“I think the market is speaking on behalf of everyone,” John Goldsmith, deputy head of equities at Toronto-based Montrusco Bolton Investments Inc., an Agrium shareholder, told Bloomberg News. He said Agrium shareholders will only benefit if the potash market recovers and warns that the merger may not get the needed votes from two-thirds of shareholders if executives can’t better explain the savings and the benefits.

“The more the stock gets weak, there will be a huge backlash from Agrium shareholders,” he said.

There has also been speculation that the proposed merger could be broken up by competing offers, as agriculture companies take advantage of lower valuations now that potash prices have plunged to around $250 a tonne, down from nearly $900 in 2009.

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