For Agrium, Strategic Benefits And Synergies Equally Important In Potash Merger

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RBC Capital Markets believe that Agrium Inc. (USA) AGU stands to gain from the planned merger with Potash Corp of Saskatchewan Inc POT from synergies and strategies. The firm termed the integration as a bold one to establish a strong business entity to face the challenges before them.

Analyst Andrew Wong thinks that the merged entity could take advantage of tactical opportunities and offer considerable leverage to market recovery in the long term.

Related Link: Valuation Gains In Potash Offsetting Potential Uncertainty

The brokerage said, "We think there are significant strategic advantages to NewCo that should not be underappreciated and could prove to be just as important as the synergies in the long run. We note 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."

The analyst complimented the companies for providing detailed and specific opportunities besides the follow-up discussions enabling him to trust the strong process. Therefore, the analyst thinks the integrated company could achieve the estimated synergies based on comparison with other industry transactions.

While stating that regulatory challenges are overstated, the brokerage thinks there is a possibility for delay citing increased scrutiny on consolidation in the agriculture industry.

However, RBC reiterated its Outperform rating and boosted the price objective from $95 to $105 citing gains from synergies and based on 48 percent of the equity value.

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Posted In: Analyst ColorPrice TargetReiterationAnalyst RatingsRBC Capital Markets
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