Several mergers and hostile takeover attempts headlined fertilizer industry news in 2010, and more are likely to come.
“At this point it’s too early to say they’ll be good or bad for us at the dealer and grower levels, but more consolidation seems certain in the fertilizer industry,” says Doug Wright, purchasing manager for Mid Kansas Cooperative. “We’ve been through it all before in the country, and in agriculture. From our viewpoint, it looks like there will be fewer companies to buy from, which to me always raises concerns about pricing.”
Those concerns are shared by others in the industry who have watched recent global acquisitions and buyout attempts. For example, in November, after several months of hot pursuit, BHP Billiton withdrew its offer to acquire Potash Corporation of Saskatchewan (PCS). As the world’s largest mining company based in Australia, BHP had launched a $40-billion takeover offer of PCS, the world’s largest potash producer. BHP reportedly withdrew its offer due to demands made by the Canadian government.
That doesn’t mean the company will give up and go back to mining. It has already bought the smaller Canadian potash firms Anglo Potash and Athabasca, which has one of the largest exploration permit areas in the Saskatchewan basin, where most of the country’s potash resources lie.
Earlier in 2010, Brazilian mining giant Vale, the world’s largest iron ore producer, agreed to pay $3.8 billion for Bunge’s fertilizer assets in Brazil. That transaction also included a 43.3% stake in Fosfertil, the country’s main provider of raw materials for fertilizer products. The company, which already mines potassium, announced in mid 2010 plans to boost production at its phosphate mine in Peru nearly 50% by the end of 2011. In early 2009 it bought potash projects in Canada and Argentina from Rio Tinto. All of these acquisitions appear to put the company on its way to reaching its goal of becoming one of the world’s largest fertilizer producers by 2017.
But it doesn’t end there. Russian potash companies Silvinit and Uralkali — two of the country’s largest potash makers — are reportedly negotiating a merger as well. Russia ranks second in world potash production behind Canada.
Yara International, the world’s largest nitrogen producer, has also been making acquisitions and forming several joint ventures all around the globe over the past few years. It bought partial ownership of Russian fertilizer producer OAO Minudobreniya, an ammonia plant in Burrup, Australia, a Finish fertilizer company, and a Libyan oil company. The Norway-based chemical firm also has purchased a Brazilian fertilizer distribution and marketing company, Canadian nitrogen producer Saskferco, and the Swiss company Balderton Fertilisers SA. Last year it also tried to buy Terra Industries in the United States.