AGU Agrium Inc. (delisted)

By Tess Stynes 

Canadian fertilizer giants Agrium Inc. and Potash Corp. of Saskatchewan Inc. said they were in preliminary talks about a possible merger that could form a company with a total market value of more than $28 billion.

However, the companies also said no decision had been made, and there is no assurance that the discussions would result in any potential deal.

Bloomberg News earlier on Tuesday reported that the fertilizer makers were in advanced merger talks, with a deal announcement possible as soon as next week.

Shares of both companies jumped on news of the talks. Agrium's stock rose 5.9% to $94.72 in afternoon trading in New York, while Potash shares increased 10% to $17.69. Including the gains Tuesday, Agrium is valued at $13 billion, while Potash has a market value of nearly $15 billion.

Talk of a potential deal lifted the stocks of other fertilizer producers. Mosaic Co. shares jumped 9% to $30.46, while CF Industries Holdings Inc. added 4.6% to $26.13.

Fertilizer producers have been hurt in recent years by depressed prices for crop nutrients amid a glut of supply and weak demand. The pressures have weighed on the sector's stocks. Before the gains Tuesday, Potash shares had fallen 39% over the past year. Agrium had dropped 14%; Mosaic, 32%; and CF Industries, 57%.

Saskatoon, Saskatchewan-based Potash in July slashed its annual earnings guidance and cut its quarterly dividend for a second time this year as it continues to contend with lower prices for potash, nitrogen and phosphate -- the three key fertilizer nutrients it produces -- as well as lower sales volume.

In 2015, Potash's earnings dropped 17% to $1.27 billion on sales that declined 12% to $6.28 billion.

Earlier this month, the Calgary, Alberta-based Agrium also cut its 2016 earnings guidance, citing weak prices for fertilizer nutrients. In 2015, Agrium's earnings rose 38% to $988 million, even as sales fell 7.8% to $14.8 billion

Any potential deal would add to a string of transactions involving the global farming sector, including the pending merger of Dow Chemical Co. and DuPont Co., both of which maintain large seed and crop chemical divisions.

In February, China National Chemical Corp. offered to pay $43 billion deal to acquire Swiss pesticide maker Syngenta AG.

Since May, German pharmaceutical giant Bayer AG, which also makes seeds and pesticides, has been pursuing a takeover of Monsanto Co., the world's largest supplier of crop seeds and genetics. Monsanto has rejected Bayer's proposals several times.

Write to Tess Stynes at tess.stynes@wsj.com

(END) Dow Jones Newswires

August 30, 2016 13:05 ET (17:05 GMT)

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