Potash surged as much as 15 percent in NY, and Agrium jumped 12 percent before trading of the companies was halted.
Fertilizer makers Potash Corp. and Agrium say they are in talks to combine into one company.
Uralkali will sell 600,000 metric tons of potash to Sinochem Group, China National Agriculture Means of Production Group Corp., and Cnooc Ltd. starting now with the agreement lasting through January. This is a merger of two major producers of a very strategic commodity, so chances are that there will be some regulatory issues that will need to be settled before the deal can indeed happen.
The firm has a market capitalization of $13.47 billion and a P/E ratio of 19.81.
The pricing power that this potential merger presents is so great that shares of other potash manufacturing companies are rallying today on the news of the possible deal.
Potash Corporation of Saskatchewan Inc is a fertilizer producer producing various primary crop nutrients, such as potash, nitrogen and phosphate. Agrium also produces fertilizers, but has a more diverse company with a retail business.
"(A merger) will make them a better force to compete on a global scale", said Mohsin Bashir, portfolio manager at Stone Asset Management Ltd, which owns Agrium shares, adding however that regulator approval may be hard to gain.
A combination looks like a good fit for Potash Corp, and is preferable to a foreign takeover, said Ryan Bushell, portfolio manager at Leon Frazer & Associates, which owns Potash shares. Last year, Potash, in turn, was rebuffed by German potash miner K+S AG SDFGn.DE .
"On the more positive side of things - and I've shared this with both CEOs - our government would even want to begin proactively working on some ideas that would make Saskatchewan an attractive place for even more jobs".
Mondelez International Inc (NASDAQ:MDLZ), Potash Corporation of Saskatchewan (USA) (NYSE:POT) and United Continental Holdings Inc (NYSE:UAL) fought off Tuesday's downbeat performance by the broader market to rank as three of the day's best performers. The Companys phosphate operations include the manufacture and sale of solid and liquid phosphate fertilizers, phosphate feed and industrial acid, which is used in food products and industrial processes.
The talks were first reported by Bloomberg.
Agrium, which had market valuation of about $16.10 billion, were up 7 per cent at $124.81.