Potash Corp., Agrium in merger talks

Saskatoon-based Potash Corp. of Saskatchewanand Agrium Inc. of Calgary have confirmed they are in merger talksa combination could produce a fertilizer giant worth more than $30 billion.

Both companies said in nearly identical statements that they are in "preliminary discussions" about "a potential merger of equals.

"No decision has been made as to whether to proceed with such a combination, no agreement has been reached, and there can be no assurance that any transaction will result from these discussions," the companies said Tuesday.

• Premier Brad Wall assured Saskatchewan's interests at forefront of PotashCorp-Agrium talks

Bloomberg News, citing unnamed sources, first reported Tuesday that the merger could be announced as early as next week.

Both stocks soared on news of the merger talks. Trading in both was subsequentlyhalted at 9:58 a.m. ET on the Toronto Stock Exchange. The shares were also halted on the New York Stock Exchange.

Trading resumed at noon ET.Potash Corp. shares ended the trading day up $2.40at$23.31on the TSX a jump of 11.5per cent.

Shares in Agriumrose$8.56on the day and closed at$125.09, a gain of 7.4per cent.

Market oversupplied

A glut of potash on the world market has caused prices to plunge and has led to layoffs and mine closures across the industry. Demand for the fertilizer has also been weak in some markets.

Potash prices have dropped by up to a third in the past year. Potash Corp, said itsaveraged realized price in the secondquarter this year had tumbled to multi-year lows of$154 US per tonne. Potash prices peaked eight years ago atabout$900 US a tonne.

"I think [a merger]will make them a better force to compete on a global scale," Mohsin Bashir, portfolio manager at Stone Asset Management Ltd, told Reuters. ButBashir saidregulatory approval for such a merger mightbe difficult to get.

Potash Corp., which is the third-biggest seller of potash in the world, has amarket capitalization of about $17.5 billion Cdn.

Agrium's market capitalization is $16.1 billion. Unlike Potash Corp,Agriumhas a chain of retail stores in the U.S., so a merger could give Potash Corp direct access to American farmers.

Minnesota-basedMosaic Co. cut 330 jobs in July when it suspendedproduction at its potash mine near Colonsay, Sask.

• PotashCorp suspends Picadilly mine in N.B., cuts 430 jobs

Earlier this year,PotashCorp. suspended production at itsPicadilly mine operation near Sussex, N.B., resulting in the loss of more than 400 jobs.