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Potash Corp & Agrium Merger Gets Regulatory Nod in China


Potash Corporation of Saskatchewan Inc. POT and Agrium Inc. AGU said that they have secured regulatory approval in China for their proposed merger of equals.

The companies noted that the approval of China's Ministry of Commerce (MOFCOM) is conditional on Potash Corp. divesting its minority shareholdings in in Arab Potash Company and Sociedad Quimica y Minera de Chile S.A. within 18 months as well as Israel Chemicals Ltd. within 9 months from the completion of the merger transaction.

MOFCOM’s approval is also conditional on Potash Corp. converting its equity interest in Sinofert Holdings Limited to a passive investment before the completion of the merger and ensuring that Canpotex remains a reliable and dedicated supplier of potash to China.

Both companies had previously obtained clearance for the merger in Canada, Russia, India and Brazil. At present, approval and regulatory review process is underway in the United States. The companies expect the transaction to close by the end of fourth-quarter 2017.

In June, Potash Corp. and Agrium announced that once their proposed merger transaction completes, the combined entity will be called Nutrien. It will play a critical role in "Feeding the Future" initiative, by acting as the largest global provider of crop services and inputs and help growers to increase sustainable food production.

Shares of Potash Corp. have moved up 8.3% over a year, underperforming the industry’s 16.1% gain.

Potash Corp., last month, narrowed full-year 2017 earnings expectations to the range of 48-54 cents per share, which includes merger related charges of 8 cents per share.

The company also revised total potash sales volume guidance and now expects sales in the range of 9.1-9.3 million tons (narrowed from 9-9.4 million tons) in 2017. It projects potash gross margin of $750-$800 million for the year. Potash Corp. also expects combined gross margin for nitrogen and phosphate in the band of $140-$190 million for 2017.

Potash Corp. is a Zacks Rank #3 (Hold) stock.

Stocks to Consider

Better-ranked companies in the basic materials space include Westlake Chemical Corporation WLK and Kraton Corporation KRA, both sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Westlake has an expected long-term earnings growth of 8.4%.

Kraton has an expected earnings growth of 25.4% for the current year.

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