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Market Analysis: Assessing Agrium-PotashCorp Merger

After Potash and Agrium announced their plan to merge and create a new company that is poised to become a leader in the fertilizer industry with estimated net revenue of about $20.6 billion, analysts have hurried to comment on the prospective benefits of the new venture.

According to Andrew Wong of Analysis Group, the merger “will create a stronger business to better handle current market challenges, capitalize on strategic opportunities, and still provide significant leverage to long-term market recovery.” Mr Wong and his colleagues think that there are significant strategic advantages “that should not be underappreciated and could prove to be just as important as the synergies in the long-run”.

The merger is expected to be finalized next year and generate as much as $500 million of annual operating synergies, which analysts think is “ambitious, but achievable.” Mr Wong added that the newly created company could also benefit from the advantage of tactical opportunities and offer considerable leverage to market recovery in the long run.

According to RBC Capital Markets, Agrium Inc. (US) will also gain from the planned merger from synergies and strategies. The company also said that the integration is bold and poised to establish a strong business entity to face the challenges before them. The company also commented that there is “potential to accelerate the Retail M&A strategy, increase value in potash by integrating with a bigger Retail; optimize assets and capital structure; and provide growth beyond 2020.”

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