Canadian fertilizer companies Agrium Inc. and PotashCorp of Saskatchewan Inc. are in preliminary talks to merge, the companies confirmed Tuesday, in what would be tie-up of the world's biggest crop nutrient company by capacity and North America's largest farm retailer.

"Both companies have been dealing with low prices and low share prices and the industry needs to consolidate,” Ryan Bushell, vice president & portfolio manager at Leon Frazer & Associates, told BNN in an interview. “This obviously would be a great tie-up, it would make the largest potash producer in the world." 

The combination could be announced as soon as next week, Bloomberg reported, citing people familiar with the matter. 

Saskatchewan Premier Brad Wall said he was “grateful” to speak with Agrium CEO Chuck Magro and PotashCorp CEO Jochen Tilk about the possibility of a merger.

“Both of them indicated to me – and it was good to hear this – that the interests of Saskatchewan have been at the forefront of even these preliminary discussions,” Wall told reporters, “I also emphasized…that we would want to see Saskatchewan’s interests protected and furthered, frankly, if there is to be a merger.”  

Fertilizer companies have suffered lower profits as prices of crop nutrients, especially potash, have tumbled to multi-year lows due to excessive supply and weak demand, tied partly to softer currencies in buyer markets such as Brazil.

"These types of assets are not proliferated around the world very easily, that's why BHP tried to buy Potash a few years ago and was rebuffed” Bushell said. “Based on that, and given the fact the government wanted to keep it Canadian at that point in time, I think the regulatory environment could be pretty favourable for this type of a merger as well." 

A deal would also make the companies a “better force to compete on a global scale,” according to Mohsin Bashir, portfolio manager at Stone Asset Management Ltd, which owns Agrium shares, cautioning however that he thinks regulatory approval may be difficult to gain.

Shares of PotashCorp, which had a market valuation of about $17.54 billion as of Monday's close, were up 11.5 per cent at $23.30 in morning trading.

Agrium, which had market valuation of about $16.10 billion, were up 7 per cent at $124.81.