Scotiabank Says This Investment Is Big For Potash Corp

In a report published Monday, Scotiabank analysts Ben Isaacson, Carl Chen and Oliver Rowe look into Potash Corp./Saskatchewan (USA)'s

investment at Heringer and qualify it as a "smart move." However, they rate the stock as a Sector Perform case, setting a price target of $36, barely above current prices.

Potash recently announced that it would buy 9.5 percent of Brazil-based fertilizers producer, marketer and distributor Heringer for $56 million. According to Scotiabank some of the main implications are: - The 'financial' investment in Heringer is "irrelevant," the firm says. "What really matters is what it buys, which is a L/T potash supply agreement for POT's New Brunswick (NB) mine. Why? The NB mine is growing from 0.8M to 2.0M mt, and is not part of Canpotex." - Potash, a producer, is going into distribution "to ensure a stable source of demand as fert markets become more supply-driven. Additionally, Brazil is unique in that it is not only one of the world's best agriculture growth stories, but infrastructure is terrible. Therefore, what is not unique is the need for producers to invest in Brazil fert distribution." - "Brazil distribution M&A. MOS acquired ADM's Brazil distribution assets, while YAR bought Bunge's. OCP bought a 10% stake in Heringer last year. The FSU producers have invested in ports/terminals, while AGU bought a tiny distributor (Utilfertil) a couple of years ago. POT is not late to the party -maybe fashionably late."