Agrium Inc. and UAP Holding Corp. announced Dec. 3 that they have entered into a definitive agreement for Agrium to acquire UAP. Under the terms of the agreement, a wholly-owned subsidiary of Agrium will purchase all of the outstanding common stock of UAP for approximately $2.65 billion in cash, including an estimated $487 million of assumed debt.
The boards of directors of both companies have unanimously approved the agreement, and the UAP board of directors has unanimously recommended that the UAP shareholders accept the tender offer.
“The addition of UAP’s business to our own retail operations is an excellent strategic fit for Agrium and a significant step in our strategy of continuing to grow and transform the company. The acquisition will significantly expand our geographic base and our product diversity, and will offer an opportunity to leverage strengths of both companies,” says Mike Wilson, president and CEO of Agrium.
“A key factor to our success will be drawing from the extensive experience of employees from both organizations,” Wilson says. “We anticipate we will be able to generate annual synergies of approximately $11 million by 2010, with a majority of this captured in 2009. We expect that these synergies will be achieved primarily by improved margins on all three crop input product groupings, largely through enhanced purchasing efficiencies.”
“This transaction represents an extraordinary opportunity for our shareholders, customers, and employees,” says Kenny Cordell, CEO and President of UAP. “Agrium is well respected in the industry and we believe that the combination of the two organizations will allow for an improved product offering and new services and technologies to be delivered to a broader range of customers.”
Agrium notes the following key benefits from the transaction:
Creates the largest North American retailer of crop inputs and services, with broader geographic coverage as a result of combining the complementary footprints of Agrium and UAP.
Expected annual synergies of approximately $11 million, with approximately $20 million in 2008, approximately $8 million in 2009, and approximately $115 million in 2010 and beyond.
Expands Agrium’s retail business model to incorporate a mid-tier service, higher-volume business.
Combined total retail sales of over $5.2 billion and combined sales of almost $8-billion on a companywide basis on a last 12-month basis.
Provides Agrium’s retail business with 265 proprietary and private label brands and more than doubles Agrium’s seed business. Seed sales have grown by over 16% per year for both Agrium and UAP over the past three years.
Provides a larger, stronger platform to support Agrium’s future growth.
Upon completion of the merger, UAP will become a wholly-owned subsidiary of Agrium. The parties expect to complete the transaction in early 2008.