Yara International ASA, the largest publicly traded nitrogen-fertilizer maker, said it agreed to buy OFD Holding Inc. from Omimex Resources Inc. for $425 million as it extends its expansion in South America.
The purchase, which includes production facilities in Colombia and distribution companies across Latin America, adds output of about 320,000 metric tons of compound NPK, 100,000 tons of calcium nitrate and 70,000 tons of ammonium nitrate, Yara said in a statement today.
“This deal marks a further step for our global growth ambition, adding almost half a million tons of upstream fertilizer capacity,” Chief Executive Officer Joergen Ole Haslestad said in the statement. The deal will “improve our downstream positioning within the fast-growing cash-crop markets in the region.”
Yara, which in December bought Bunge Ltd.’s operations in Brazil for $750 million, earlier this year shelved a planned expansion of its Belle Plaine plant in Canada partly due to the high level of construction costs. Yara is now in talks with BASF SE, the world’s largest chemical maker, about setting up a joint venture to build an ammonia plant on the U.S. Gulf Coast.
Talks with BASF have been constructive and “you could say that we have pre-approved it,” Haslestad said in an interview in Oslo today.
If the companies are able to agree on the price and site, as well as source feedstock, “then both of us are ready to push the button around summertime,” he said.
Yara expects annual synergies of about $20 million from its acquisition of OFD, through logistics and sourcing, and from substituting third-party sourced products with its own, Oslo-based Yara said. The transaction is expected to close in the second quarter, it said.
The main advantages of the acquisition, in addition to synergies, “are the local production acquired and the improvement in the balance of sales,” Citigroup Inc. said in a note. “Most of the sales volumes will be during the northern hemisphere winter and will deliver for the group a near equal balance of volumes across the year, helping to improve production planning and working capital management.”
Shares in Yara, which is holding its capital markets day in Oslo today, fell as much as 1.8 percent and traded 1.3 percent lower at 261.7 kroner as of 11:20 a.m. local time, extending its loss during the last 12 months to 3.8 percent and giving the company a market value of 72.9 billion kroner ($11.9 billion).
Yara’s upstream operations convert natural gas and nitrogen into ammonia, which forms the basis for all nitrogen fertilizer.