CF Industries and OCI N.V. confirm deal to create most powerful nitrogen producer of our timePosted On: 06-08-2015 By: Laura Cross
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CF Industries has confirmed a deal to consolidate with OCI’s European, North American and Global Distribution businesses.
The deal was confirmed on 6 August 2015, only a few weeks after a leak was reported in the Wall Street Journal on 17 July. The two companies issued statements to confirm that preliminary discussions were being held, which certainly did not give the impression at the time that a deal could be agreed as quickly as it has.
The transaction has been unanimously approved by both companies’ boards of directors, and it will include OCI’s nitrogen production facilities in the Netherlands and its soon-to-be-completed US greenfield nitrogen project in Iowa. The deal also includes OCI’s interest in the Beaumont, TX ammonia and methanol complex, a 45% interest in its Natgasoline methanol project, also in Texas, and its global distribution business based in the UAE.
CF’s official statement continued:
“Under the terms of the agreement, CF will become a subsidiary of a new holding company domiciled in the United Kingdom, where CF is the largest fertilizer producer following its recent acquisition of GrowHow. OCI will contribute its European, North American and Global Distribution businesses to the new UK company in exchange for shares equal to a fixed 25.6 percent of new CF plus $700 million of consideration to be paid in a mix of cash or shares at new CF’s discretion, of which $550 million is assumed to be paid in shares. Additionally, the new CF will have an agreement to purchase a 45 percent interest in Natgasoline for approximately $500 million in cash. Upon completion of the transaction and based on the current share price, CF shareholders would own approximately 72.3 percent of the new company and OCI would own approximately 27.7 percent. Most of OCI’s shares will be distributed to its shareholders. Final consideration mix (cash and new CF stock) and resulting ownership split will be dependent on the CF share price at the time of closing. The new corporation will operate under the name CF and be led by existing CF management. The initial board of the new corporation will have 10 directors, consisting of eight of CF’s current directors, as well as Greg Heckman, former CEO of The Gavilon Group, LLC and current OCI N.V. board member, and Alan Heuberger, senior portfolio manager for Bill & Melinda Gates Investments (BMGI). The combined company will maintain its principal executive offices in Deerfield, Illinois and will be listed on the New York Stock Exchange under the ticker symbol CF.”
The official statement released from CF certainly does not underestimate the sheer scale of this development – the deal will create not only the world’s largest publically traded nitrogen company, but also represents the most significant M&A deal in the nitrogen market in years.
The announcement follows a ramp up in nitrogen M&A activity following on the heels of CF acquiring the remaining 50% interest in GrowHow from original joint venture partner Yara, and the disposal of CF’s 50% stake in Keytrade.
The transaction is valued at approximately US$8 billion, based on CF’s current share price. Not that long ago here at Integer, we were considering the impact of the swiftly abandoned CF and Yara merger discussions, and at that point we initially valued the global nitrogen market at US$100billion in 2013.
In CF’s release it stated that the newly combined company would have annual nitrogen capacity (including methanol) of approximately 12 million nutrient tonnes by the middle of 2016, when the transaction is expected to close.
More analysis to follow….
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The call will include an introduction to the nitrogen industry, the competitive position of both CF Industries and OCI, an insight into the changing North American market, and a chance to ask any specific questions you may have about the impact of the development.
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About the author:
Laura is Integer’s Lead Nitrogen Analyst and Editor of the Nitrogen Cost and Profit Margin Service. Most recently she has worked extensively on the preparation of marketing prospectuses for the financing stages of several greenfield nitrogen investments in North America. Laura has presented at numerous international conferences on fertilizer market trends, the industrial nitrogen market, and long-term fertilizer demand. Laura has a BSc in Physical Geography from King’s College London.
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