Agrium seeks buyback, shares drop

Calgary fertilizer giant Agrium has announced plans to buy back up to five per cent of its common shares, considering them undervalued, the day before its stock and those of other fertilizer and ag firms took a hit in trading.

“We believe the current price of our shares does not reflect Agrium’s achievements nor our strong future prospects,” Agrium CEO Mike Wilson said in a release Wednesday.

Agrium said it would buy back shares from the open market for cancellation starting on Oct. 6 (Monday) and will terminate the offer on Oct. 5 next year.

“Although we are announcing a buyback of up to five percent of our outstanding shares, that amount could be increased depending on our share price performance, future financial position and growth opportunities,” Wilson said.

On Thursday, however, shares in Agrium and other fertilizer companies took a pounding on their stock exchanges, with Agrium closing on the TSX at $45.01, down 23 per cent. Saskatoon’s PotashCorp dropped 26 per cent to $101. Regina grain company Viterra closed Thursday at $9.40, down 60 cents.

On the NYSE, meanwhile, Minnesota fertilizer firm Mosaic closed at US$39.65, down over 40 per cent. Ag equipment makers Deere and CNH Global closed down 14 and 11 per cent respectively. Monsanto closed at US$82.01, down $15.83, while Bunge closed at US$50.16, down $12.84.

The Globe and Mail and Canadian Press reported that fertilizer companies’ stocks dropped after the sector took a downgrade from “buy” to “underperform” from a Merrill Lynch analyst, who cited a “more uncertain” near-term fertilizer demand outlook due to recent declines in corn prices.

The downgrade and resulting declines in fertilizer stock prices were among several factors that helped knock TSX-traded shares down almost seven per cent overall on Thursday, the Globe reported.

Agrium’s announcement Wednesday follows similar news on Sept. 11 from PotashCorp, when it raised the ceiling on a previously-announced share buyback from five per cent up to 10 per cent of its common shares. PotashCorp CEO Bill Doyle said at the time that the company was “significantly undervalued versus our long-term potential.”

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