Agrium to buy UAP to expand retail

Agrium Inc. is buying UAP Holding Corp. for $2.65 billion, creating North America’s largest agricultural retailer with a market share of almost 15%, the firms said Monday.

Demand for food and biofuel has depleted world grain stocks, pushing crop prices to new highs. That makes the time right to expand retail sales of fertilizers, chemicals, seeds and services, Agrium Chief Executive Mike Wilson said.

“If you look at the ag market, you couldn’t find a better time to be strengthening your position,” Wilson said.

Calgary, Canada-based Agrium, the world’s No. 3 nitrogen producer, would pay $39 a share in cash for UAP in its friendly offer. It would also assume UAP’s debt of about $487 million.

The offer, expected to close in early 2008, represents a 30% premium over Greeley, Colo.-based UAP’s Friday closing price of $29.91.

UAP shares jumped 28%, or $8.37, to $38.28 on Monday. Agrium’s shares rose 5.4%, or $3.14, to $60.98.

Agrium is expanding retail operations to stabilize earnings when the cyclical wholesale nitrogen market turns down. Before the deal, Agrium and UAP each had about 8% of the U.S. farm supply market.

The market is consolidating as farmers become larger and want one-stop suppliers, said Karla Kimrey, UAP spokeswoman.

UAP had itself bought up about $300 million in retail stores last year, with plans for more. UAP has 370 facilities, and Agrium has more than 500 in the United States and South America. Agrium executives said they expected minimal overlap, and didn’t expect regulators to order any divestitures for antitrust reasons.

Combined, the two companies would have annual retail sales of more than $5.2 billion. The deal would give Agrium net annual sales of more than $8 billion.