FTC Clears Agrium, Inc.'s Acquisition of Unocal

Companies are Among the Nation's Leading Producers of Nitrogen Fertilizers

For Release

In an agreement that will protect consumers and promote continued competition in the sale of nitrogen fertilizers, the Federal Trade Commission today accepted a proposed consent order that would resolve the competitive concerns arising out of Agrium, Inc.'s proposed acquisition of the nitrogen fertilizer business of Union Oil Company of California (Unocal). The proposed Commission order would require Agrium to divest a deepwater terminal and other assets that serve customers in Oregon, Idaho, and Washington.

Agrium, which has production facilities in Texas and near its headquarters in Alberta, Canada, is one of the world's largest producers of nitrogen fertilizers, with 1998 sales of $501 million. Unocal produces and sells nitrogen fertilizers through its subsidiaries Alaska Nitrogen Products, LLC and Prodica LLC, and has facilities in Alaska, Washington, Oregon and California. Unocal's wholesale sales of nitrogen fertilizers in 1998 totaled $337 million.

"Agrium's purchase of these Unocal assets would have violated federal law by leading to the reduction of competition in the Northwest for the sale of nitrogen fertilizer products," Richard G. Parker, Director of the FTC's Bureau of Competition said. "This agreement will ensure that farmers pay competitive prices for this essential nutrient."

Agrium and Unocal are the leading sellers in the Northwest of the most popular nitrogen fertilizers: anhydrous ammonia, urea and UAN 32% solution. Purchasers of these fertilizers are not easily able to substitute other fertilizers due to agricultural considerations and commercial factors. Only nitrogen fertilizers contain the nitrogen required for plant growth. There is also no substitute for urea in the manufacture of urea formaldehyde resin, an important commercial resin.

According to the Commission's complaint, Agrium's acquisition of Unocal's nitrogen fertilizer business would violate Section 7 of the Clayton Act and Section 5 of the FTC Act by substantially reducing competition in the sale of nitrogen fertilizers in the Northwest, creating a dominant firm in the sale of ammonia, urea and UAN 32 % solution. The transaction as proposed, the Commission contends, would lead to a significant increase in market concentration, and a likely increase in the prices of these nitrogen fertilizers within the region. In addition, entry by another competitor to alleviate these anticompetitive effects, the complaint states, especially within the next two years is unlikely.

Under the terms of the proposed order, which is subject to a public comment period and final FTC approval, Agrium would be required to divest Unocal's deepwater terminal near Portland, Oregon (Rivergate), part of its upriver terminal in central Washington (Hedges) - which contains urea storage capacity and land for expansion and road access - as well as the leases on three UAN terminals, including one with deepwater access.

The FTC is preliminarily satisfied that the proposed buyer of the divested assets, J.R. Simplot Company, is well-qualified to maintain the divested assets in a competitive manner, effectively replacing the competition lost through the merger. Simplot is a $2.8 billion agribusiness that, among other operations, produces and sells nitrogen and other fertilizers around North America. Simplot is a substantial supplier of phosphate fertilizers in the Northwest, and the purchase of these assets will enable it to become a major importer and wholesaler of nitrogen fertilizers in the region.

According to the order, Agrium would be required to divest the specified assets to Simplot immediately after the Commission makes the consent final. If the Commission determines that Simplot is not an acceptable buyer, however, or that the manner of divestiture is not acceptable, it will notify Agrium of such findings and the respondents would be required to immediately rescind the transaction. The assets would then have to be re-divested to an appropriate Commission-approved buyer in an acceptable manner within four months of the finalization of the order.

The proposed consent also contains a provision that requires the respondents to use their best efforts to maintain the facilities to be divested as they would in the ordinary course of business, prior to their transfer to Simplot or another acquirer. The Commission also would reserve the right to appoint a trustee to divest any assets that have not been divested in accordance with the terms of the order. The Commission also would be permitted to seek civil penalties if the respondents do not comply with the terms of the order.

Finally, for 10 years after the order becomes final, the respondents would be required to provide written notice to the Commission before acquiring any interest in: 1) any asset to be divested; or 2) any terminal with deepwater access used in the transfer and storage of UAN 32% in the Northwest. The respondents also would be required to submit a report detailing their compliance with the order within 30 days of the date it becomes final and for every 60 days thereafter until all of the divestitures have been completed. In addition, Agrium would be required to provide annual reports to the Commission for the full term of the order (10 years) and Unocal would be required to submit reports until the assets to be divested are transferred to Agrium.

The Commission vote to accept the proposed consent agreement was 4-0, with Commissioner Orson Swindle not participating. An announcement regarding the proposed consent agreement will be published in the Federal Register shortly and will be subject to public comment for 30 days, until October 30, 2000, after which the Commission will decide whether to make it final. Comments should be addressed to the FTC, Office of the Secretary, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580.

NOTE: A consent agreement is for settlement purposes only and does not constitute an admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of $11,000.

Copies of the complaint, proposed consent agreement, and an analysis of the proposed consent order to aid public comment, are available from the FTC's Web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580; 877-FTC-HELP (877-382-4357); TDD for the hearing impaired 202-326-2502. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.

Mitchell J. Katz

Office of Public Affairs

202-326-2161

John B. Kirkwood

FTC Northwest Region

206-220-4484

(FTC File No. 001-0100)

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