Boston, MA 09/24/2014 (wallstreetpr) – CF Industries Holdings, Inc. (NYSE:CF) announced that it is in talks with Yara International ASA (ADR) regarding a potential merger.
New, Bigger Entity
According to the Wall Street Journal article, CF Industries Holdings, Inc. (NYSE:CF) and Norway-based Yara are seeking a merger to create a new entity. The deal is expected to the biggest maker of nitrogen fertilizer of the world as the new company would generate $19 billion annually in the global fertilizer business. According to the 2013 revenue figures for CF and Yara, which were $5.47 billion and $13.4 billion, the market value of the integrated company would be $26.4 billion.
The two companies are proposing to combine to create a new powerhouse that will combine CF Industries Holdings, Inc. (NYSE:CF)’s immediacy to cheap natural gas with Yara’s global distribution system. Low-cost natural gas is an important component in nitrogen fertilizers. The decreasing crop prices and increasing competition from China have created immense pressure on fertilizer makers. In such a scenario, the companies expect the merger to be a solution to the industry’s recent need for consolidation.
There has been a long train of merger events in the fertilizer industry recently. Yara itself had acquired OFD Holding in a $750 million deal, to boost its operations in Latin America. CF was also engaged in spinning-off its phosphate business to Mosaic Co (NYSE:MOS) for $1.4 billion. In 2010, CF Industries Holdings, Inc. (NYSE:CF) had acquired Terra, outbidding Yara with its $4.7 billion offer.
The companies however said that the merger proposition is only in the initial stage and may not necessarily result in a merger. In view of analysts, such a tie-up would raise regulatory inquiry because it involves two companies that have a big individual market shares. Yara’s spokesman, Esben Tuman, underlined that the talks are based on the understanding that both the companies operate in different geographical areas.