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Unocal completes sale of agricultural products business to Agrium Unocal’s Alaska business unit will continue to provide natural gas to the Nikiski fertilizer complex through 2009 Petroleum News Alaska
Unocal Corp. has completed the sale of its agricultural products business to Calgary-based Agrium Inc. The price was approximately $321 million; there are possible future considerations, the company said Sept. 29. The sale was effective 11:59 p.m. PDT Sept. 30.
The sale included Unocal’s Prodica LLC and Alaska Nitrogen Products LLC subsidiaries.
Unocal said it received approximately $246 million in cash ($250 million adjusted for working capital and other changes) plus $50 million principal amount of Agrium 6 percent convertible securities and approximately 2.6 million shares of Agrium common stock.
The securities are convertible into approximately 4.2 million additional Agrium common shares. Unocal said it could also receive participation payments for the next six years related to future ammonia and urea prices.
Unocal divesting non-core businesses “The sale is the latest step in the ongoing transformation of Unocal into a significant upstream E&P company,” Roger C. Beach, Unocal chairman and chief executive officer, said in a statement. “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.”
Unocal said it expects to use the cash proceeds from the sale for general corporate purposes, which may include debt reduction or possible acquisitions. Unocal has the right to have the Agrium convertible securities and common shares registered for resale. Unocal said proceeds from any resales would we used in like fashion.
Unocal said its Alaska oil and gas business unit will continue to supply natural gas to the Nikiski plant pursuant to a 1998 agreement between Unocal and Alaska Nitrogen Products. The agreement expires in 2009.
Alaska Nitrogen Products manufactures ammonia and urea for agricultural and industrial customers in the Pacific region. Agrium one of largest nitrogen suppliers Agrium is a leading global producer and marketer of fertilizer and a major retail supplier of agricultural products and services in both North America and Argentina.
“Since our initial public offering in 1993, Agrium has grown from its regional base to a position of leadership as a nutrient supplier to the global agricultural community,” Agrium President and CEO John Van Brunt said in a Sept. 29 statement. Van Brunt said that acquisition of the Unocal Agricultural Products Division, combined with startup of the Agrium Profertil nitrogen fertilizer complex in Argentina, “increases our nitrogen capacity by 60 percent, making Agrium one of the largest suppliers to the world nitrogen market.”
Agrium said the acquisition also enhances the company’s North America natural gas position. The combination of natural gas hedges and fixed price contracts for Alaska production “results in Agrium having approximately 70 percent of its North American natural gas requirements fixed at prices 62 percent below the Nymex forward prices for the fourth quarter of 2000, and approximately 54 percent of calendar 2001 requirements fixed at prices 58 percent below the forward Nymex prices.”
“China’s impending entry into the World Trade Organization is expected to reopen its huge market for urea imports, which will increase the strategic importance of Agrium’s deepwater shipping facilities at Kenai and in South America,” Van Brunt said.
The Nikiski fertilizer complex includes two ammonia and two urea plants with an annual production capacity of approximately 1 million tonnes of urea and 600,000 tonnes of net ammonia.
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