CF Holds Talks With Dutch Rival OCI About Fertilizer Deal

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Nassef Sawiris
Egyptian billionaire Nassef Sawiris,. Photographer: Scott Eells/Bloomberg

CF Industries Holdings Inc., the largest U.S. producer of nitrogen-based fertilizer, said it’s in preliminary talks about a combination with certain businesses of Dutch rival OCI NV.

There’s no guarantee talks will result in a transaction, CF said in a statement on Monday, without providing further details. OCI, the fertilizer producer run by Egyptian billionaire Nassef Sawiris, is in talks about possible combinations or transactions, it said in a separate statement, without identifying CF.

The merger being discussed by the two companies would exclude OCI operations in Egypt and Algeria, said a person familiar with the matter, who asked not to be identified because the talks are private. OCI also has production assets in the Netherlands and the U.S.

The potential deal would allow CF to expand outside the U.S. while also tightening its grip over the domestic market, according to Colin Isaac, a London-based analyst at Atlantic Equities LLP. The Iowa plant being built by OCI is the largest nitrogen-fertilizer expansion in the U.S. after CF’s own projects, he said in a phone interview.

OCI’s European assets “aren’t as low-cost as the U.S. but they are still quite profitable,” Isaac said

CF dropped 5.7 percent to $65 in New York, giving it a market value of $15.3 billion. OCI American depositary receipts fell 1.1 percent to $33.27, valuing the company at $6.99 billion.

Tax Inversion

It’s the second time in less than a year that CF has tried to merge with a competitor. In October, it terminated talks with Norway’s Yara International ASA about creating the world’s biggest maker of nitrogen fertilizer.

CF Chief Executive Officer Tony Will said in November the industry is “heavily fragmented” and he was still interested in buying production assets instead of building them.

The Wall Street Journal, which first reported the CF-OCI talks, said a deal could be structured as a so-called inversion, in which a U.S. company moves its tax domicile to another country with lower rates.

Sawiris, Egypt’s richest man, relocated Orascom Construction Industries to the Netherlands from Egypt last year through a buyout by OCI. He has a 29 percent stake in OCI, according to data compiled by Bloomberg.

CF Industries Spike 7.5% on News of Talks with OCI

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News of the CF-OCI talks comes as Monsanto Co., the world’s largest seed company, is pursuing a $45 billion takeover of Syngenta AG, the biggest producer of pesticides.

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