Premier Brad Wall is paying close attention to a potential merger between Agrium and PotashCorp. of Saskatchewan.
On Tuesday, Potash Corp. and Calgary-based Agrium confirmed they are in preliminary merger talks.
Both companies issued statements confirming the news after their shares were halted on the Toronto Stock Exchange.
They said no agreement has been reached and there is no assurance any transaction will result from these discussions.
Wall has already spoken with the head of PotashCorp, the world’s largest fertilizer company by capacity, and said he wants to ensure jobs and revenues are protected.
“We would want to see Saskatchewan’s interests protected and furthered frankly, if there is to be a merger,” Wall maintained. ” Those interests are jobs and taxes paid.”
Agrium is based in Calgary, but Wall hopes a new head office could be based in Saskatchewan.
“We would view this potentially, if it were to come to fruition, as an opportunity to perhaps pursue an even greater corporate presence in Saskatchewan on the part of a newly-merged entity if in fact that were to occur.”
In 2010, Wall came out against a hostile takeover of PotashCorp. by Australian mining giant BHP Billiton.
The federal government scuttled the deal under foreign ownership regulations.
Those regulations don’t apply for this potential merger because Agrium and PotashCorp are both based in Canada.
Such potential mergers would be subject to review by the Competition Bureau under The Competition Act.
That is a far less onerous process and most mergers are approved within 30 days.
After the BHP Billiton event, PotashCorp. pledged to remain a good corporate citizen in Saskatchewan, promising to return its head office to the province, increase it’s aboriginal workforce and play a philanthropic role in the province.
Wall expects that pledge to continue if any merger were to happen.
Before the companies’ shares were halted, PotashCorp. 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.
The rise in share prices made PotashCorp. worth $19.6 billion and Agrium worth $17.4 billion, creating the potential for a $37 billion agricultural giant.
The merger talks come as the fertilizer industry struggles with a steep drop in prices in recent years following a ramp-up in production and the breakup of a Russia-Belarusian potash trading cartel in 2013.
Potash producers have responded to the price drop by cutting production, with PotashCorp going so far as to shutter its recently opened Picadillymine in New Brunswick in January, putting 430 people out of work.
The industry has looked for consolidation in the past, with PotashCorp. pushing for a US$8.7 billion takeover of K+S Group last year that was rebuffed by the German fertilizer group.
The Saskatchewan government formed PotashCorp. in 1975 as a Crown corporation.
The company was privatized in 1989.
Agrium, a major producer of agricultural products including potash, was founded in 1931.