Agrium-PotashCorp merger could signal 'next great frontier,' Calgary chamber president says

The head office for a newly created agriculture giant will be in Saskatoon, as Calgary-based Agrium and Saskatoon-based PotashCorp announce a merger Monday, but some analysts say it’s not a total loss for Calgary.

New entity will be worth an estimated $36B

Agrium's headquarters is pictured in Calgary, on Wednesday, May 7, 2014. Potash Corp. of Saskatchewan and Agrium have agreed to merge in a deal that would create a global agricultural giant worth an estimated US$36 billion. (Larry MacDougal/The Canadian Press)

The head office for a newly-created agriculture giant will be in Saskatoon, as Calgary-based Agrium and Saskatoon-based PotashCorp announce a merger Monday, but some analysts say it's not a total loss for Calgary.

The new entity will be worth an estimated $36 billion.

Trevor Tombe, an assistant professor of economics at the University of Calgary, says he can only speculate why the merging companies didn't choose this city, but he says corporate income taxes may have been a consideration.

"Certainly locating in Alberta, moving from ten to 12 per cent, increased Agrium's costs and they might think that future changes aren't worth the risk of staying here," Tombe said.

The companies have said the merger will create $500 million in operating synergies while Tombe says that could lead to duplication challenges.

Economist Trevor Tombe says Calgary trails only Toronto when it comes to corporate head offices. (Monty Kruger/CBC)

"When they say operational synergies they mean things like duplicate jobs. They will only need one head of marketing rather than the two that currently exist. There is also going to be ways they can coordinate operations across both companies, maybe share some facilities, share transportation, share marketing and advertising channels. Things of that nature will lower costs," he said.

The new company will maintain a corporate office in Calgary.

Tombe says Calgary is the number two destination for head office locations in Canada, behind only Toronto.

"One company's decision does not make a trend, and we shouldn't look at this and think that the sky is falling," Tombe said.

The Calgary Chamber of Commerce isn't worried about the loss of a head office.

"The functional activities of the CEO's office will still be based out of Calgary," chamber president Adam Legge told CBC News.

Adam Legge, Calgary Chamber president, says agriculture could be the next great frontier that helps diversify the Alberta economy. (CBC)

"So, while it's disappointing to see that officially it will be in another province, hopefully the major decision-making power, say around investments and hiring, will largely be filled out of Calgary."

Legge says while it's too soon to talk about job losses, he says agriculture companies are key to diversifying the Alberta economy.

"It's less cyclical than oil and gas and it demographically lines up with a growing population. It's highly incorporating science and technology and there's a great available credit. We've got lots of the natural assets and advantages in terms of arable land. I think agriculture is our next great frontier," Legge said.

PotashCorp says the merger will save both companies about $500 million.

Saskatchewan Premier Brad Wall predicts that layoffs will likely be on the logistics side and shouldn't affect Saskatchewan.

With files from Natasha Frakes and Brooks Decillia