Agrium Gets Approval for Two Acquisitions, Must Divest Four Alberta Sites

On behalf of its retail business – Crop Protection Services (CPS), Agrium has announced that it has received regulatory approval for two deals - its previously announced deal to purchase 18 retail locations across the northern U.S. Corn Belt from Cargill AgHorizons, and the group’s latest deal to acquire 16 locations across Western Canada from Andrukow Group Solutions.

Under the terms of the Cargill deal, Cargill has agreed to divest its 18 ag-retail locations that sell inputs including seeds and fertilizer at locations in Nebraska, South Dakota, Minnesota, Wisconsin, Michigan, and Indiana with annual revenue in excess of $150 million. However, the sale does not include Cargill’s Canadian crop input retail locations.

Adding to this North American expansion, Agrium has also reached an agreement with Andrukow Group Solutions for the acquisition of 16 retail sites across Western Canada in a deal that it says “will increase our retail presence close to our manufacturing facilities in Western Canada, where we can optimize freight and handling.”

"The acquired locations will increase our Retail presence close to our manufacturing facilities in Western Canada, where we can optimize freight and handling, and in the U.S. Corn Belt, where we are under-represented in a key growing region,” said Agrium's President and CEO, Chuck Magro. “We remain committed to the strategy of growing our Retail business through multiple growth levers, including acquisitions, where we have a full pipeline of opportunities."

However, to secure approval, Canada’s Competition Bureau is enforcing requirements upon Agrium as its sees the Andrukow deal as lessening competition in the sale of nitrogen fertilizers in certain markets in Alberta and Saskatchewan. An agreement filed with the federal Competition Tribunal states that Agrium will be called upon to sell its own locations at Marwayne and St. Paul, Alberta, and will also be required to sell the Andrukow locations at Wainwright and Sedgewick, Alberta.

Crop Protection Services will also be barred from further acquisitions of similar ag retail and fertilizer assets in proximity to the Andrukow sites for the next three years, or from purchasing back the divested assets for the next 10 years.

After reviewing sales information from CPS, Andrukow, and third party business rivals, the Competition Bureau stated that if the deal proceeded without the required divestitures, it would “lead to a substantial lessening or prevention of competition in the retail supply of urea, UAN or anhydrous ammonia in a number of local markets in Alberta and Saskatchewan.”

But That’s Not All…

Agrium is indeed seeing a dynamic year. Not only will the firm be moving forward on its North American retail site expansion, but only weeks ago announced that it was engaged in talks with Potash Corp. regarding a merger of equals that would create an agribusiness giant valued at more than C$30 billion.

Much like what has been occurring in the seed and input industry, fertilizer companies are looking to consolidation as a means of weathering the challenges created from falling commodity prices and a glut of potash on the world market. Spot prices for potash throughout the U.S. Corn Belt fell by 34 percent over the past year, while Potash’s average realized price per ton fell to US$154 in the second quarter 2016 from US$273 last year and US$900 in 2008, according to the Financial Post.

If successful, the deal would combine Potash’s access to 20 percent of the world’s total supply of potash with Agrium’s agricultural product distribution network that saw sales of $15 billion last year, while giving Agrium the ability to expand its offerings of potash and other fertilizer products prior to an eventual rebound in prices.