Who gets jobs in potash merger?
31 Aug 2016
Who gets jobs in merger?
Alberta, Saskatchewan both eager to be lead dog if Agrium, Potash link up
An interprovincial tug of war for jobs and economic benefits could be looming if Calgary-based Agrium Inc. and Potash Corp. of Saskatchewan move ahead with a merger.
The two companies, which confirmed Tuesday that they are in preliminary talks, said no agreement has been reached and there is no assurance that any transaction will result from the discussions. But the possibility of a merger — which has the potential to create a new international fertilizer giant worth more than $30 billion — had politicians from both provinces vowing to defend local interests.
Saskatchewan Premier Brad Wall fired the first salvo, telling reporters Tuesday morning in Regina that his government “absolutely” has an interest in any deal between the two companies.
“We have an obligation to Saskatchewan people to protect Saskatchewan’s interests and to further them,” Wall said.
“On the more positive side of things — and I’ve shared this with both CEOs — our government would even want to begin proactively working on some ideas that would make Saskatchewan an attractive place for even more jobs.”
Later that afternoon, Alberta’s Minister of Economic Development and Trade Deron Bilous said his government is already “talking to Agrium directly” and touting Alberta’s lack of a provincial sales tax, high concentration of corporate headquarters, and transportation and logistics advantages.
“Frankly, when you look at our comparative and competitive advantages, Alberta far outstrips Saskatchewan,” Bilous said in an interview. “I am confident in Alberta and how our province has competitive advantages.”
Potash Corp. — headquartered in Saskatoon — is the world’s largest potash producer by capacity, while Calgary-based Agrium is the largest global agricultural retailer, selling seeds, fertilizer and crop protection products to farmers. Agrium also has a wholesale division, through which it produces and markets nitrogen, potash and phosphate fertilizers.
Both companies have struggled to contend with an oversupplied fertilizer market that has seen prices fall from US$900 per tonne in 2008 to less than US$300 today. A potential merger is probably a move to generate growth and cut costs, said Colin Isaac, an analyst with Atlantic Equities in London.
“People will use this as evidence we’re at the bottom of the cycle,” Isaac said in an interview. “It’s probably more about synergies and generating some growth.”
It is unclear what a deal — referred to by the companies as a “potential merger of equals” — could mean for the head office facilities and jobs currently located in either province, but the issue is a touchy one. In 2010, a $40-billion hostile bid for Potash Corp. by Australia’s BHP Billiton Ltd. sparked such concern in Saskatchewan that the federal government ultimately blocked the deal.
“Potash is the jewel of the Saskatchewan economy. It’s still perceived as such,” said Sylvain Charlebois, Dean of the Faculty of Management and a Professor in Food Distribution and Policy at Dalhousie University. “Politically, it would probably be easier to see Potash Corp. gobble up Agrium than vice versa.”
However, Alberta has reason to be invested in the outcome of the merger talks, too. The oil and gas downturn has resulted in thousands of job losses and a rising office vacancy rate in Calgary, and diversified agri-business companies such as Agrium are valued.
“With respect to Premier Wall’s comments, I’m not surprised. He’s an opportunist; he’s paid to be an opportunist,” said Mary Moran, president and CEO of Calgary Economic Development. “I would just say our understanding is that this is very, very preliminary with respect to these companies’ conversations. And this is a merger … as opposed to an acquisition.”
Moran said her organization is working on a recruitment and retention strategy for company headquarters and will be reaching out directly to Agrium to talk up the “value proposition” of keeping its headquarters in Calgary.
Shares in both companies surged Tuesday before being halted on the Toronto Stock Exchange. Potash Corp. stock had climbed $2.40 or 11.48 per cent to $23.30 on the day and Agrium was up $8.28 or 7.1 per cent to $124.81.