Potash merger will help firm deal with industry challenges, Wall says

  • 13 Sep 2016
  • Leader-Post
  • BRUCE JOHNSTONE

Potash merger will help firm deal with industry challenges, Wall says

Premier Brad Wall said he’s generally pleased with the merger between Potash Corp. of Saskatchewan and Agrium Inc., which he believes will create an “international champion” that can withstand the headwinds currently buffeting the industry.

The two companies announced Monday a US$26-billion deal to form the largest crop nutrient company in the world and the third-largest natural resource company in Canada.

The combined entity will have an enterprise value of US$36 billion, a workforce of about 20,000 employees, operations in 18 countries, with corporate headquarters in Saskatoon and offices in Calgary. PotashCorp CEO Jochen Tilk will become executive chairman of the new, as-yet-unnamed company, while Agrium’s CEO Chuck Magro will be the new company’s CEO. Agrium will also have one additional seat on the board of directors.

“The potash industry has gone through a lot of challenges lately,’’ Wall told reporters at the Legislative Building on Monday. “The prices have not been strong. We’ve seen what some analysts would consider to be pretty aggressive pricing from Russians and Belarusians, so that has put our own potash companies in a bit of a challenging circumstance.”

“Now we see the creation of one of the largest agricultural companies, one of the largest fertilizer companies in the world, headquartered in our province. I think it sets those two companies up, if the merger’s approved, to compete quite well.’’ But Wall added that the provincial government will watch the merger process closely to make sure that the two companies live up to their commitments in terms of head office jobs and promises not to cut production jobs in Saskatchewan: “This is obviously just the beginning of what can be a fairly long progress. We’re going to monitor it to ensure … that Saskatchewan economic interests are protected and furthered.’’

Wall said Agrium’s Magro and PotashCorp’s Tilk have convinced him that the projected US$500 million a year in annual operating “synergies,’’ which the companies say will be achieved “primarily through distribution and retail integration, production and (administration) optimization and procurement,’’ will not be at the expense of jobs in Saskatchewan.

“Mr. Tilk has said, with respect to the synergies they’re expecting, the efficiencies or the savings the company will make, will be on the logistics side, not on the operations side,’’ Wall said, adding that he’s hopeful that the Agrium head office jobs relating to its potash mine at Vanscoy will be coming to Saskatoon.

“I think Saskatchewan people should feel comfortable that this announcement means the headquarters (of the new company will be) in Saskatoon.’’

Lastly, he said he was “glad we fought the fight we did five or six years ago,’’ referring to the $38-billion hostile takeover bid for PotashCorp by BHP Billiton in 2010. “Without it, we wouldn’t be having this discussion. There wouldn’t be a PotashCorp. of Saskatchewan. So there also wouldn’t be an opportunity to create an even larger, more significant entity headquartered in our province.’’

But NDP Leader Trent Wotherspoon said the premier should be ensuring that all Saskatchewan jobs will be protected under the merger deal, not just head office jobs. “What kind of ironclad guarantees are being provided on that (head office) front? What does it means when you’re consolidating all your mining operations for workers? The risk … is that this (merger) could mean fewer workers,’’ Wotherspoon said, noting the industry has already closed down mines and laid off workers because of low potash prices.

“The companies can speak for themselves … The premier needs to stand up for Saskatchewan people. In this case, there are a lot of concerns — jobs, revenues, our economy, price for producers. So we don’t need the premier to cheerlead a deal on behalf of these companies. We need him to stand up for Saskatchewan people.’’

 

 

 

About prosperitysaskatchewan

Consultant on Saskatchewan's natural resources.

Posted on September 13, 2016, in economic impact, political, potash. Bookmark the permalink. Leave a comment.

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