Agrium, Potash merging to create fertilizer giant

Canadian fertilizer giants Potash and Agrium have agreed to what they described as a "merger of equals" in yet another major deal shaking up the agricultural sector amid sluggish crop prices.

Calgary-based Agrium (AGU) and Saskatoon, Saskatchewan-based Potash (POT) revealed their agreement Monday morning, about two weeks after saying they had began preliminary talks.

They said they expect to save about $500 million annually in "synergies," a corporate term that typically includes slashing overlapping costs and combining purchasing power.

Their tie-up comes as agricultural suppliers are grappling with dour crop prices amid a global economic slowdown and currency challenges.

But that might not be the only factor. Fitch Ratings senior director Monica Bonar said in a research note that the companies will glean benefits from their combined distribution power and "market reach," which will "allow the company to optimize its product margins."

Potash shares fell 0.2% to $16.95 at 10:54 a.m. Agrium shares slipped 1.5% to $93.77.

Shareholders of Potash will hold 52% of the new company, while Agrium shareholders will own 48%, based on an stock exchange rate negotiated based on closing prices Aug. 29, the day before talks were publicly acknowledged.

The combined company, whose name will be identified at a later date before the deal closes, will have nearly 20,000 employees with operations in 18 countries. Together, Agrium and Potash had annual revenue of $20.6 billion in 2015 and earnings before interest, taxes, depreciation and amortization (EBITDA) of $4.7 billion.

Potash CEO Jochen Tilk will become executive chairman of the new company. Agrium CEO Chuck Magro will become CEO of the new company.

“This is a transformational merger that creates benefits and growth opportunities that neither company could achieve alone," Magro said in a statement. "Combining our complementary assets will enable us to serve our customers more efficiently, deliver significant operating synergies and improve our cash flows to provide capital returns and invest in growth.”

The deal marks the latest development in a flurry of merger and acquisition activity for the ag sector, including:

•German chemical and pharmaceutical giant Bayer's effort to acquire U.S. agribusiness rival Monsanto.

•U.S. chemical and agricultural giants Dow Chemical and DuPont are trying to win regulatory approval for their megamerger, followed by a split into three companies.

•ChemChina's planned $44 billion takeover of Swiss agricultural giant Syngenta.

Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.