Agrium optimistic proposed sale will ease FTC concerns

Posted: Tuesday, August 01, 2000

Agrium Inc. officials are waiting to hear whether the proposed sale of Oregon and Washington facilities will ease Federal Trade Commis-sion concerns with their proposed purchase of Unocal's agricultural products business.

Calgary, Alberta-based Agrium has agreed, if the purchase goes through, to sell Unocal's Rivergate terminal in Portland, Ore., and part of its Hedges storage site, near Kennewick, Wash., to J.R. Simplot Co., according to Agrium's second-quarter earnings report.

Terms of the agreement with J.R. Simplot have not been disclosed. Unocal spokesperson Barry Lane said the Rivergate and Hedges facilities are transshipment sites where ammonia and urea arrive by barge and leave by truck or train.

The FTC's concerns have nothing to do with Agrium's proposed purchase of Unocal's Alaska Nitrogen Products fertilizer plant in Nikiski, Jim Pendergast, Agrium director of investor relations, said in May.

"While the FTC approval is the major hurdle we have to get over, we're proceeding on as many fronts as possible to be prepared to have Unocal employees integrate with Agrium and Unocal information systems integrate with Agrium," he said. "They are on Unocal's payroll system now. They'll move to Agrium's system."

Doris Wagner, Agrium coordinator of investor relations, said the prime FTC concern has been over how the proposed purchase from Unocal would affect competition in the Pacific Northwest.

"We produce a large amount of product and so does Unocal," she said. "We both produce and distribute in the same area. If we combine, does it reduce competition in the market?"

That is the question the FTC has been asking, she said.

In 1999, Unocal reported $313 million in fertilizer sales, all to resellers or industrial users, Lane said. Those sales were all from West Coast operations, he said, but he could not reveal what fraction was sold to customers in the western United States.

Agrium has 224 U.S. retail outlets, including 103 in California, Oregon, Washington and Idaho. In 1999, it reported $1.7 billion in fertilizer sales, including $887 million in North American wholesale sales and $794 million in North American retail sales. Of its North American sales, roughly 23 percent were in the western United States.

The FTC is reviewing the proposed sale to J.R. Simplot, Wagner said. If that satisfies its concerns, the purchase of Unocal's agricultural products business will go through.

Unocal, based in El Segundo, Calif., has been shedding noncore businesses to focus on oil and gas exploration and production, which bring greater returns. In 1997, it sold its West Coast refining and marketing business to Tosco Corp.

In 1998, it tried unsuccessfully to sell its agricultural business, which includes the Nikiski fertilizer plant, Cook Inlet oil and gas assets, an ammonia production plant in Finley, Wash., terminals in Fresno, Calif., and Portland and product-upgrade facilities in Kennewick and West Sacramento, Calif.

In September, Unocal spun off the Nikiski plant as Alaska Nitrogen Products LLC, and its West Coast agricultural assets as Prodica LLC. Its Alaska oil and gas business is now a business unit within Unocal. In January, Unocal announced the agreement to sell ANP and Prodica to Agrium for about $325 million. It has retained its Alaska oil and gas business.

Agrium arranged financing in February of up to $250 million, available through October, to complete the purchase from Unocal. Officials with the two companies originally hoped to close the deal early in the second quarter. However, they have put off closing pending FTC approval.

"Closure was June 30, then it was moved until July 31, and we're still waiting," Wagner said.

The company's July 24 second-quarter report said negotiations have been going well.

"These discussions have been very positive and productive to date, and the parties anticipate completing the transaction within the next few weeks," it stated.

Wagner said she now hopes the deal can close by Aug. 31 at the latest.

Agrium reported more than $1 billion in sales during the first six months of 2000.

"Looking ahead, we are very optimistic about the second half of 2000 and the year 2001," said John Van Brunt, president and chief executive. "The supply-demand fundamentals for the industry look very favorable, particularly for nitrogen."

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