Agrium Divesting Canadian Retail Assets - Analyst Blog

Agrium, Inc.'s AGU wholly owned subsidiary – Crop Production Services (Canada) Inc. –  has agreed to divest its selected Canadian retail assets to the U.S. farmer-owned cooperative and a global energy, grains and foods company CHS Inc. CHSCP for an undisclosed price.

Per the agreement, Agrium's 16 retail agronomy locations in the provinces of Alberta and Saskatchewan will become part of CHS's Country Operations division following the divestment. The transaction is expected to close on or about Apr 1, 2014.

According to CHS, the acquisition will expand its ability to serve farmers and ranchers in Canada, and return value to customers through local experts with global connections. The new 42,000-ton fertilizer plant outside Shelby, MT, which is in its final stages of construction, will benefit the newly acquired business. The new fertilizer plant is expected to start its operations from spring 2014 season.

The 16 retail agronomy assets are part of Agrium's acquisition of Viterra Inc.'s 210 retail stores across Western Canada in Oct 2013, in addition to the 13 previously acquired Viterra retail locations in Australia for a total consideration of roughly CAD 300 million ($270.8 million).

Agrium had entered into a consent agreement with the Canadian Competition Bureau before receiving green signal to acquire Viterra's Canadian retail assets.

Per the terms of the consent agreement, Agrium had to divest 7 retail stores and 9 anhydrous ammonia businesses. Agrium also agreed to supply anhydrous ammonia to any buyer of the divested assets for up to four years at prices not to exceed those charged to its retail outlets in Alberta and Saskatchewan.

According to Agrium, the acquisition of Viterra's assets was an excellent fit to its portfolio as it enabled the company to provide highly competitive products, services and technologies by combining its experience with Viterra's profound knowledge of western Canadian agriculture.

Agrium, a prominent Canadian fertilizer company along with Mosaic MOS, released its fourth-quarter 2013 results last month. The company's earnings from continuing operations in the reported quarter dropped 69.3% year over year to $110 million or 74 cents per share from earnings from continuing operations of $358 million or $2.37 per share a year ago.

Excluding one-time items other than stock-based payment costs, adjusted earnings of 72 cents per share missed the Zacks Consensus Estimate of 88 cents.

Agrium logged revenues of $2,867 million in the reported quarter, down roughly 7% year over year. Sales declined due to a 24% drop in Wholesale sales as a result of lower realized prices across all product lines and lower nitrogen volumes, partly offset by increased retail sales due to the Viterra acquisition. Sales missed the Zacks Consensus Estimate of $3,037 million.

Agrium currently carries a Zacks Rank #3 (Hold). Another company in the fertilizer industry worth considering is Scotts Miracle-Gro SMG; carrying a Zacks Rank #2 (Buy).