Unocal Corp. said Jan. 19 that it has reached agreement to sell its agricultural products business to Calgary-based Agrium Inc. for approximately US$325 million and future consideration.
The agreement involves the sale of Unocal's Prodica LLC and Alaska Nitrogen Products LLC subsidiaries.
Under the agreement, Unocal would receive US$250 million in cash plus US$50 million in newly-issued Agrium 6 percent convertible preferred securities and US$25 million in Agrium common stock (at a 4 percent discount to market). In addition, the agreement provides for participation payments to Unocal over the next six years related to future ammonia and urea prices.
Value for stockholders
"The sale will provide good present value to Unocal stockholders, especially when you compare the short-term earnings expectations for the business against potential returns from our highly promising upstream exploration and production portfolio," said Roger C. Beach, Unocal chairman and chief executive officer. "The terms of the agreement also provide upside potential for us to continue to participate in the business if ammonia and urea prices rise above projected levels over the next six years."
Beach said the sale is the latest step in the ongoing transformation of Unocal into a new breed of energy company. "As we divest our non-core businesses, we are able to focus on exploiting upstream opportunities, which historically has been the highest-return segment of the oil and gas industry," he said.
Unocal expects to use the proceeds from the sale for general corporate purposes, including debt reduction.
The sale is subject to certain regulatory approvals. Unocal said it expects the transaction to be completed by early in the second quarter. Credit Suisse First Boston advised Unocal with respect to the sale.
540 employees affected
Unocal is a leading independent oil and gas exploration and production company with pipeline and power plant development projects worldwide. Prodica provides nitrogen and sulfur products to agricultural and industrial customers throughout the western United States and northern Mexico. Alaska Nitrogen Products manufactures ammonia and urea at its Nikiski plants for agricultural and industrial customers in the Pacific Region.
Prodica and Alaska Nitrogen Products have approximately 540 employees. It is expected that most of these employees will be offered positions with Agrium. Exact staffing requirements will be determined once the transaction is completed.
Agrium is a leading producer and marketer of fertilizer in North America and a major retail supplier of agricultural products and services in both North America and Argentina.