Hanfeng Evergreen Inc. has raised more than $80-million in financing deals that will give Canada's second-largest fertilizer producer, Agrium Inc. of Calgary, nearly 20 per cent of Toronto-based Hanfeng and expand both companies' sales of slow-release fertilizers in China.
Hanfeng announced Monday it had struck a deal to sell to Agrium 11.96 million common shares from its treasury for $6.22 each, raising $74.4-million and giving Agrium about 19.6 per cent of the company. That ownership will be about equal to that of Xinduo Yu, Hanfeng's largest shareholder and CEO.
Agrium is Canada's second-biggest fertilizer company, with annual sales of about $3.3-billion and more than 4,700 employees at the end of 2005. PotashCorp. of Saskatchewan is Canada's largest fertilizer company with annual sales of $3.9-billion.
In a separate deal Monday, Hanfeng sold one million shares to a division of PetroChina Petrochemical Co., a 1.6 per cent stake, and struck a joint-venture deal to develop plants with the Chinese company to produce Hanfeng's slow- and controlled-release fertilizers.
As part of the Agrium deal, two nominees from the Calgary company will join the Hanfeng board. As well, Agrium and Yu have granted the other a right of first refusal if they wish to sell their Hanfeng shares and promised not to acquire over 25 per cent of the company, unless they offer for the entire company.
"Agrium recognizes both the enormous potential of the China market and Hanfeng's operational and technical expertise," Agrium CEO Michael Wilson said before stock markets opened Monday.
"In partnering with them, we feel that both companies are now in a very strong position to enhance product offerings in our respective markets."
Hanfeng said money raised from the share issues will be used to finance more fertilizer plants, cut debt and finance expansions of the company's Heilongjiang and Jiangsu operations in China.
"Our growth to date is the result of the focused execution of a business strategy aimed at establishing Hanfeng as an effective operator and producer, and a leader in developing, advancing and commercializing slow and controlled release fertilizers," said Mr. Yu, CEO of Hanfeng.
"In allying ourselves with globally recognized companies like Agrium and PetroChina, we further solidify our leading position and accelerate our low-cost growth in the two largest fertilizer markets in the world."
In early trading on the Toronto Stock Exchange on Monday, Agrium shares fell 32 cents to $44.03, while Hanfeng stock rose 39 cents to $8.14.