Competition Bureau statement regarding proposed merger between Agrium and Potash Corporation of Saskatchewan
OTTAWA, September 11, 2017 — On September 11, 2017, the Bureau issued a No Action Letter (NAL) with respect to the proposed merger between Agrium Inc. (Agrium) and Potash Corporation of Saskatchewan Inc. (PCS). The NAL indicates that the Commissioner of Competition does not, at this time, intend to make an application under section 92 of the Competition Act in respect of the proposed transaction.
The Bureau's investigation involved multiple products produced by Agrium and PCS (the Parties), including potash fertilizer, dry phosphate fertilizer, liquid phosphate fertilizer and nitric acid. The Bureau concluded that the proposed transaction is not likely to lead to a substantial lessening or prevention of competition with respect to potash fertilizer, dry or liquid phosphate fertilizer or nitric acid.
In the course of its review, the Bureau conducted interviews with numerous market stakeholders including customers, competitors, industry associations and provincial government bodies. The Bureau also reviewed documents produced by the Parties and analyzed transaction data provided by the Parties and third parties.
Throughout its review, the Bureau worked closely with the United States Federal Trade Commission (FTC) and with its counterparts in other jurisdictions.Footnote 1 The Bureau's long standing relationship with the FTC ensured an efficient and coordinated review of this matter, consistent with the agencies' agreement on Best Practices on Cooperation in Cross-Border Merger Investigations.
This statement summarizes the approach taken by the Bureau in its review of the proposed transaction.Footnote 2
Agrium and PCS both manufacture and supply fertilizer products globally. Agrium's subsidiary, Crop Production Services Canada Inc., also operates retail stores across Western Canada that sell crop inputs to farmers. Fertilizer is used by farmers to enhance plant growth. The main types of fertilizer (nitrogen, phosphates and potash) correspond to the major macronutrients for plant growth and are not substitutable for each other. In Canada, Agrium manufactures dry phosphate fertilizer at its Redwater, Alberta facility and mines potash at its Vanscoy mine in Saskatchewan. In Canada, PCS owns and operates five potash mines in Saskatchewan and one currently idle potash mine in New Brunswick. Agrium and PCS, along with The Mosaic Company (Mosaic), are shareholders of Canpotex Limited, which markets and exports potash outside of Canada and the United States.
i. Potash fertilizer
The Parties supply customers globally with potash from their mines in Saskatchewan. Canadian customers are currently supplied by the Parties, Mosaic and K+S Potash Canada (K+S), all Saskatchewan based producers, and little to no potash has historically been imported into Canada. While global prices of potash are correlated with the price of potash in Canada, the Bureau found that foreign producers (e.g. those in Russia) are currently unlikely to constrain a small but significant price increase in Canada.
In addition to Mosaic, which has three mines in Saskatchewan, K+S recently entered the market with the operation of a single mine in Saskatchewan. Market contacts indicated that Mosaic and K+S are, or are likely to be, effective supply options for potash in Canada. Market contacts and sales data also indicated that fertilizer customers switch between suppliers and source from multiple suppliers simultaneously. Due to the presence of Mosaic and K+S as alternatives suppliers, and the ability of fertilizer customers to source potash from multiple suppliers or to switch between potash suppliers, the Bureau concluded that the proposed transaction is not likely to lead to a substantial lessening of competition relating to potash in Canada.
ii. Dry phosphate fertilizer
Agrium mines phosphate rock in Idaho and has processing facilities in Idaho and Alberta where it produces mono-ammonium phosphate (MAP), a form of dry phosphate fertilizer. PCS mines phosphate rock and produces MAP in North Carolina and Florida.
Liquid phosphate fertilizer is priced at a premium to dry phosphate fertilizer and is perceived by users to have unique characteristics as a starter fertilizer. The Bureau considered different possible product market definitions for dry phosphate fertilizer (e.g., MAP alone versus all dry phosphate fertilizers) and concluded that the merger is not likely to result in a substantial lessening of competition under any of the definitions considered. The Bureau determined that the geographic market for dry phosphate fertilizer is likely North America. In addition to the Parties, US-based Mosaic (in Florida) and Simplot (in Idaho) supply dry phosphate fertilizers into Canada. Mosaic is the largest producer of dry phosphate fertilizer in North America and will remain so post-merger. As a result of the effective remaining competition from Mosaic and Simplot the Bureau concluded that the proposed transaction is not likely to lead to a substantial lessening of competition relating to dry phosphate fertilizer in Canada.
iii. Liquid phosphate fertilizer
The Parties produce two liquid phosphate products: superphosphoric acid (SPA), which is an input into ammonium polyphosphate (APP), and APP, a starter fertilizer. Agrium, PCS and Simplot are the only manufacturers of SPA in North America and each of their facilities are located in the US. The Parties do not overlap with respect to sales of SPA in Canada, nor was there documentary evidence suggesting that they currently compete for such sales. The Bureau concluded that the Proposed Transaction was not likely to result in a substantial lessening of competition relating to liquid phosphates in any market in Canada.
iv. Nitric Acid
The Parties each have nitric acid plants in Ohio. Nitric acid is used in industrial applications, such as dairy processing, electroplating and industrial cleaning, and can be produced in different concentrations to suit a customer's operational requirements. The Bureau considered different possible product market definitions related to different concentrations of nitric acid. In each case, the Bureau determined that the Parties are not closely competing for customers in Canada, and that a large producer in Ontario and other producers in the US also supply nitric acid in Canada. Market contacts indicated that these producers are effective supply options for different concentrations of nitric acid in Canada. The lack of close rivalry between the Parties in Canada and the presence of other nitric acid suppliers led the Bureau to conclude that the proposed transaction is not likely to lead to a substantial lessening of competition relating to nitric acid in Canada.
Based on several reasons, including the presence of effective remaining competition and the entry of a new competitor in potash, the Bureau concluded that the proposed transaction is not likely to lead to a substantial lessening or prevention of competition with respect to potash fertilizer, dry or liquid phosphate fertilizer or nitric acid.
This publication is not a legal document. The Bureau’s findings, as reflected in this Position Statement, are not findings of fact or law that have been tested before a tribunal or court. Further, the contents of this Position Statement do not indicate findings of unlawful conduct by any party.
However, in an effort to further enhance its communication and transparency with stakeholders, the Bureau may publicly communicate the results of certain investigations, inquiries and merger reviews by way of a Position Statement. In the case of a merger review, Position Statements briefly describe the Bureau's analysis of a particular proposed transaction and summarize its main findings. The Bureau also publishes Position Statements summarizing the results of certain investigations, inquiries and reviews conducted under the Competition Act. Readers should exercise caution in interpreting the Bureau’s assessment. Enforcement decisions are made on a case‑by‑case basis and the conclusions discussed in the Position Statement are specific to the present matter and are not binding on the Commissioner of Competition.
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