Agrium Acquires Unocal Fertilizer Business

Agrium Inc. (Calgary, AB) will pay $325 million in cash and stock to acquire the nitrogen-based production and distribution operations of Union Oil Company of California (Unocal) in Alaska, Washington, Oregon and California.

The agreement involves the sale of Unocal's Procidia LLC and Alaska Nitrogen Products LLC (ANP) subsidiaries. Unocal spun off the Procidia operation on Oct. 1, 1999, and ANP in 1998. Unocal, which wants to focus on its core exploration and production operations, set up both businesses as independent companies in order to sell or spin them off.

Agrium will acquire two Kenai, AK, fertilizer plants and related storage facilities. The units, which have capacity for 590,000 mt/yr ammonia and 1 million mt/yr urea, have a long-term contract for natural gas priced well below those in Western Canada or the lower 48 states.

Agrium will also acquire Unocal's ammonia, ammonium nitrate, and urea-ammonium nitrate (UAN) solution plants at Kennewick and Finley, WA, and Sacramento and Fresno, CA. It also receives terminal, storage, dock, and barge facilities at these locations and at Portland, OR.

"Unocal's production and distribution assets in the continental United States are very complementary to our operations and an excellent strategic fit," says Agrium president/CEO John Van Brunt.

"The Alaskan operations, combined with our existing offshore business and new 50-50 joint venture nitrogen plant in Argentina, the latter anticipated to start up at mid-year, catapult the company into the status of a significant international nitrogen player. At the same time, we are strengthening our position as the low cost producer in North America. We expect the acquisition to be accretive almost immediately."

The deal will cost Agrium $250 million in cash; $50 million in newly- issued Agrium 6% preferred securities convertible to common shares at a 20% premium over the Agrium common share price when the transaction closes; and $25 million in Agrium common stock (at a 4% discount to the market).

In addition, over the next six years Agrium will pay Unocal 35% of the excess if an international commodity price index for ammonia and urea rises above certain forecasted prices for output from the Kenai facilities.

Agrium is a major North American producer and marketer of nitrogen, phosphate, potash, and sulfur fertilizer products. It also operates as a retail supplier of agricultural products and services in North America and Argentina.

By Alan S. Brown