OSLO--Norway's Yara International ASA and U.S.-based CF
Industries Holdings Inc. are in merger talks to form the world's
biggest producer of nitrogen fertilizers with over $18 billion in
annual sales, the companies said Tuesday.
A merger would create one of the biggest players in the global
fertilizer market, boosting the companies" negotiating power with
producers of fertilizer ingredients like phosphate and potash. The
combined market cap of Oslo-based Yara and Deerfield-based CF
Industries would be $26.3 billion, slightly below the $28.9 billion
market cap of Canadian fertilizer giant Potash Corp of
Saskatchewan, the world's largest producer of potash.
RS Platou Markets analyst Per Haagensen called the potential
tie-up "a perfect match" that would help Yara expand its foothold
in the U.S. while giving CF Industries access to Yara's significant
international distribution network.
The North American market is attractive for fertilizer companies
due to its cheaper shale gas supplies, a key input factor in
fertilizer production. Yara has sought to boost its presence there
beyond last year's 14% of total sales and plans to build an ammonia
plant in Freeport, Texas with German chemical giant BASF SE.
Yara in a statement described the talks as "a potential merger
of equals, " adding that the discussions are "at an early stage"
and that there were no assurances they would result in a deal. CF
Industries published a similar statement.
The companies have butted heads over deals before. CF Industries
in 2010 outbid Yara to purchase Terra Industries Inc. for $4.7
billion, in a deal that formed one of the world's biggest nitrogen
fertilizer makers. In 2013, CF Industries recorded sales of $5.47
billion while Yara reported sales of $13.4 billion.
Yara recently acquired fertilizer producer OFD Holding Inc.,
strengthening its presence and distribution network in Latin
America and complementing a previous $750 million acquisition of
Brazilian fertilizer producer Bunge Ltd. (BG).
CF Industries operates seven nitrogen fertilizer manufacturing
complexes in the central U.S. region and Canada and a network of
distribution terminals and warehouses, mainly in major
grain-producing states in the Midwest. Yara has operations in over
50 countries and sales to more than 150 countries.
A merger must be approved by Yara's biggest owner, the Norwegian
government, which owns a 36% stake. The government has said it
won't reduce its stake in Yara below 34%, but declined to comment
Tuesday on whether it was ready to spend any money to maintain the
current stake. The second-biggest owner of Yara is the
state-controlled Government Pension Fund Norway with a 4.72%
stake.
The talks follow a string of recent steps by the Norwegian
government to reduce its ownership in some firms. The government
owns about a third of the shares listed on the Oslo Stock Exchange,
including a 67% stake in oil giant Statoil ASA (STO).
The government said Monday it was prepared to sell its 59.17%
stake in Oslo-listed salmon farmer Cermaq ASA to Mitsubishi Corp.
(8058.TO), in a deal valuing the company at 8.88 billion Norwegian
kroner ($1.40 billion). That followed an announcement on Sept. 17
that it planned an initial public offering of fully-owned
real-estate company Entra, in what could be the biggest listing on
the Oslo Stock Exchange since 2010.
Write to Kjetil Malkenes Hovland at
kjetilmalkenes.hovland@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires