Agrium Inc., the third-largest fertilizer producer in Canada and the U.S., agreed to buy UAP Holding Corp. for $2.16 billion to double its U.S. retail outlets as demand for crop-protection products gains.
UAP investors will receive $39 in cash for each share, a 30 percent premium to the Nov. 30 closing price, Calgary-based Agrium said today in a statement. Agrium said it also will take on $487 million of Greeley, Colorado-based UAP’s debt. The two companies expect the transaction to close early next year.
Agrium is buying UAP to boost sales of fertilizer as demand rises for grains and oilseeds to produce food and fuel. The purchase also adds UAP’s Dyna-Gro seeds and Loveland crop- protectants to Agrium’s potash, nitrogen and phosphate fertilizers.
“The UAP acquisition will modestly improve Agrium’s business position and is a good fit with the company’s existing retail operations,” Standard & Poor’s analysts including Jatinder Mall said today in a note to investors. “The company’s retail operation will be the largest in North America and hold the No. 1 position in the crop protection, fertilizer and seed businesses.” Buying UAP will add about 370 facilities in the U.S., about doubling the company’s retail outlets in the country, Wilson said today on a conference call with analysts. The acquisition also boosts Agrium’s business in regions such as the U.S. Southern Delta and Florida, where the company can serve new crop markets.
Ethanol Demand U.S. farmers this year planted the most corn since 1944 to meet increasing demand for ethanol fuel additives. Corn requires more fertilizer than other crops such as soybeans and wheat.
Agrium shares rose C$3.02, or 5.3 percent, to C$60.42 as of 10:39 a.m. in Toronto Stock Exchange trading. Before today, they had gained 57 percent this year. UAP added $8.39, or 28 percent, to $38.30 on the Nasdaq Stock Market. Before today, the shares had gained 19 percent this year.
Combining the two businesses will allow Agrium to generate annual savings of $115 million by 2010 and will add to earnings in the first year, the companies said. Agrium said it expects to raise $1.25 billion in equity to help finance the purchase.
“The transaction will enable Agrium to capitalize on the strong outlook for agriculture markets and will allow us to deliver value to both our shareholders and our customers,” Agrium Chief Executive Officer Mike Wilson said in the statement. “It increases the scale and size of our business.” The purchase also more than doubles Agrium’s seed business, in which sales have gained more than 16 percent a year for both companies over the last three years, and will give the retail business 265 proprietary and private-label brands.
