US fertilizer giant CF Industries to buy European rival OCI’s assets for $8 bn

One of America's leading fertilizer makers CF Industries Holdings Inc has agreed to acquire Dutch rival OCI NV's European and North American plants and global distribution business for approximately $8 billion in a stock-and-cash deal, aiming to create the world's biggest publicly-traded nitrogen producer.

The transaction, which assumes approximately $2 billion of OCI's debt, is the biggest merger in the fertilizer sector since 2011.

Under the deal, Deerfield, Illinois-based CF will buy OCI's nitrogen production facilities in Geleen, Netherlands, and Wever, Iowa, and the company's interest in an ammonia and methanol complex in Beaumont, Texas, along with its global distribution business based in Dubai, UAE.

The combination is expected to establish a premier global footprint, leverage distribution network and enhance growth prospects, the companies said in a statement yesterday.

CF will become a subsidiary of a new UK-based holding company. OCI will get 25.6 per cent shares of new CF and also $700 million to be paid in a mix of cash or shares.

The new CF will be entitled to buy a 45-per cent stake in OCI's Natgasoline project in Texas, one of the world's largest methanol plants, for about $500 million with an option to acquire the remaining interest as well.

CF president and chief executive officer Tony Will said, ''This is a terrific opportunity for the shareholders of both companies, with mid- to high-teens cash flow accretion.''

CF Industries is a global leader in the production of nitrogen products for agricultural and industrial applications. The company operates manufacturing facilities in the US, Canada, and the UK.

It also owns a 50-per cent interest in an ammonia facility in Trinidad and Tobago.

Amsterdam-based OCI is a global producer and distributor of fertilisers and chemicals. Its products include nitrogen fertilisers, methanol and other natural-gas based products for agriculture and industry. The company has the capacity to produce nearly 8 million tonnes of nitrogen fertilizers from its plants in the Netherlands, the US, Egypt and Algeria.

''Combining our businesses with CF builds upon the company's platform in Europe and expansive distribution network in North America, enhancing our collective scale and improving our ability to meet the needs of customers in the US and around the world,'' OCI chief executive officer Nassef Sawiris said.

The new entity will have production capacity of approximately 12 million nitrogen-equivalent tonnes by mid-year 2016. The total production capacity is expected to jump 65 per cent over the next two years.

By combining the businesses, CF expects to achieve approximately $500 million in synergies through improved operational efficiencies by using OCI's expansive distribution network in North America and reducing logistics costs.

CF's recent acquisition of UK fertilizer producer GrowHow is also expected to complement creation of significant synergies.

The transaction is expected to deliver mid-to-high-teens cash flow accretion to CF shareholders, CF said.

Upon completion of the transaction, CF shareholders will own about 72.3 per cent of the new company while OCI would own approximately the remaining 27.7 per cent.

OCI's founding and controlling shareholders including the Sawiris family, have agreed to vote in favour of the transaction. They will own about 15 per cent of the new CF.

The transaction approved by the boards of both the companies, is expected to close in 2016, subject to approval of shareholders of both the companies, regulatory approvals and other customary closing conditions.

Morgan Stanley & Co LLC and Goldman Sachs & Co are serving as financial advisors to CF Industries on the transaction while OCI's lead financial advisor is Zaoui & Co, with Bank of America Merrill Lynch and JP Morgan also acting as advisors.