As Potash and Agrium contemplate a transformational deal, both CEOs can count on boardroom counsel from proven M&A veterans.David Stobbe/Reuters
Maybe we shouldn't have been surprised by Tuesday's news of the potential merger of Potash Corp. of Saskatchewan Inc. and Agrium Inc. After all, the groundwork for a deal was laid over the course of a decade in the boardroom, as both fertilizer companies prepared for global consolidation.
As part of a conscious effort to build M&A expertise at the highest level, Saskatoon-based Potash and Calgary's Agrium landed directors who are veterans of the corporate battles that played out during the last commodity cycle – a period that saw established Canadian mining companies Falconbridge, Alcan and Inco snapped up by foreign buyers.
In the small community that is Corporate Canada, that's created strong links between the two potential merger partners, along with ties to the world's biggest commodity companies.
"To their credit, the boards recruited [directors] with an eye towards what is happening in their sector, globally," said an M&A adviser who works with both Potash and Agrium. "In a world where relationships are critical, they are both impeccably connected."
The deal-making expertise starts with Agrium chairman Derek Pannell, who was CEO of Falconbridge in 2006 when it was taken over by Xstrata in what was briefly the world's largest mining takeover, after flirting with numerous suitors, including China-based mining conglomerates.
Mr. Pannell joined the Agrium board in 2008, and has been through a series of successful acquisitions. He is also the acting chairman of African Barrick Gold Plc, a company spun of out Barrick Gold Corp.
At Potash, Aaron Regent joined the board last year, and his résumé includes serving as president of Falconbridge, beside Mr. Pannell, and CEO of Barrick Gold.
Mr. Regent remains on a first-name basis with every mining CEO as founder of a large private equity fund that acquires mining assets, called Magris Resources Inc. (In a sign of just how tight the community can be, former Falconbridge CFO Steve Douglas is now CFO at Agrium.)
Potash also named investment banker Christopher Burley to its board in 2009. He advised global energy companies on deals during a 23-year career that ended with an appointment as Calgary-based vice-chairman of Merrill Lynch. Since Mr. Burley joined the board, Potash has fought off a takeover offer from BHP Billiton Ltd. and in turn been spurned by K+S AG, one of Europe's largest fertilizer companies.
CEOs at Potash and Agrium are responsible for coming up with a growth strategy and executing those plans; the board is meant to oversee management on behalf of shareholders. Ultimately, the fate of this merger, or any alternative offers for the company, rests with Jochen Tilk at Potash, parachuted into the top job in 2014 from Inmet Mining Corp., and Agrium CEO Chuck Magro, who also took the reins in 2014 after joining the company in 2009.
But as Potash and Agrium contemplate a transformational deal, both CEOs can count on boardroom counsel from proven M&A veterans.
Potash Corp. (POT)
Close: $23.76, up 46¢
Agrium (AGU)
Close: $126.36, up $1.27
Andrew Willis