Almost a week has passed since PotashCorp (POT) and Agrium (AGU) announced a merger, and the market hasn’t responded positively to the news. PotashCorp’s stock is down almost 4% to $16 from the price prior to the announcement, and Agrium is down almost 1.3% to $91.5 during the same period.
Agrium began recovering while PotashCorp continued to slide down. YTD (year-to-date), both companies have performed below the relevant benchmark. PotashCorp has a negative YTD return of 7.2%, while Agrium has done better with a return of 2.8% YTD as of September 21. The S&P 500 has returned 7.5%, and the VanEck Vectors Agribusiness ETF (MOO) has returned 8.5% YTD. The market appears to be unsure of how this deal will benefit them.
The VanEck Vectors Agribusiness ETF invests a third of its portfolio in agricultural chemicals like Monsanto (MON), which recently agreed to Bayer’s buyout, and Syngenta (SYT), which is also pending a merger with ChemChina. While the market sentiment for Monsanto on the merger was bearish, the response to the PotashCorp-Agrium merger isn’t affirmative either. Read our series Why Is Monsanto Trading at a 25% Discount to Bayer’s Offer? for more information.
To justify this deal to the market, the CEOs of both PotashCorp and Agrium held a joint presentation on September 20, almost one week after the deal announcement, and outlined the reasons behind the deal as well as addressing questions from analysts on the merger.
In this series, we’ll discuss the key takeaways from that presentation and look at some of the pressing issues brought up during the Q&A session at the end of the presentation.