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Mergers Sweep Fertilizer Sector

Agriculture: CF to merge with OCI, Rentech and CVR get together

by Alexander H. Tullo
August 14, 2015 | A version of this story appeared in Volume 93, Issue 32

Credit: CF Industries
CF’s distribution terminal in Blair, Neb.
A CF distribution terminal in Blair, Nebraska.
Credit: CF Industries
CF’s distribution terminal in Blair, Neb.

A rash of consolidation has broken out in the fertilizer industry. CF Industries will strengthen its leading position in nitrogen fertilizers with the purchase of plants in North America and beyond from the Dutch firm OCI. CVR Partners will acquire a facility from Rentech Nitrogen. And PotashCorp continues a hostile bid for Germany’s K+S.

CF is paying $8 billion in cash, stock, and assumed debt for the OCI assets. For that price CF will get OCI’s massive nitrogen complex in Geleen, the Netherlands; a large fertilizer plant in Wever, Iowa; and an ammonia/methanol plant in Beaumont, Texas. It will also acquire OCI’s distribution business and a 45% interest in Natgasoline, a methanol project under construction in Beaumont.

OCI will hold on to fertilizer plants in Algeria and Egypt. It will also keep the recently purchased BioMCN methanol facility in the Netherlands and a 55% interest in Natgasoline.

Meanwhile, CVR’s deal with Rentech Nitrogen is worth $533 million, also in cash and equity. CVR will get Rentech’s East Dubuque, Ill., nitrogen fertilizer plant, creating the fifth-largest nitrogen supplier in North America.

Anders Isberg, an analyst with the consultancy CRU Group, says the mergers are likely the consequence of uncertain times in the fertilizer industry. Nitrogen markets are oversupplied, he says, and prices have been declining.

For CF, the OCI acquisition will help navigate these choppy waters. For instance, buying the Wever plant knocks out a low-cost competitor in the middle of the U.S. corn belt. CF also will benefit from a beachhead in Europe with the Dutch plant and will establish itself in methanol.

Similarly, CVR is acquiring a facility with easy access to Midwestern farmers. Rentech claims the East Dubuque plant is one of the most profitable in North America.

The fertilizer consolidation isn’t relegated to nitrogen products. PotashCorp is attempting to take over Germany’s K+S to get its hands on the company’s German potash assets and a potash project in Saskatchewan. However, K+S shareholders have thus far rejected the unsolicited proposal.



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