CF Industries Agrees To Buy Businesses From OCI In $8 Bln Deal

(RTTNews) - CF Industries Holdings, Inc. (CF) and OCI N.V. Thursday said they have entered into a definitive agreement for CF to combine with OCI's European, North American and Global Distribution businesses in a transaction valued at about $8 billion, including the assumption of around $2 billion in net debt.

The transaction is expected to deliver attractive, mid-to-high teens accretion in cash flow to CF shareholders.

The deal will create the world's largest publicly traded nitrogen company, and is expected to increase CF's effective nitrogen capacity per share by 18 percent. The transaction has been unanimously approved by the boards of directors of both companies.

The transaction includes OCI's nitrogen production facilities in Geleen, the Netherlands, and Wever, Iowa, and the company's interest in an ammonia and methanol complex in Beaumont, Texas. It also includes its global distribution business based in Dubai.

The combined entity will also buy a 45 percent interest plus an option to acquire the remaining interest in OCI's Natgasoline project in Texas, which when completed in 2017 will be one of the world's largest methanol facilities.

On a combined basis, the company will have production capacity of approximately 12 million nitrogen-equivalent nutrient tons by the middle of 2016.

CF sees significant cost reduction and operational efficiencies by leveraging the distribution network in North America to reduce logistics costs. Process expertise and access to existing critical spare parts inventory pool would reduce capital requirements with increased production, the company noted.

Further, the Netherlands facility complements the recent acquisition of GrowHow to create significant synergies.

The deal is expected to increase production capacity by approximately 65 percent over next 24 months.

As per the agreement, CF will become a subsidiary of a new holding company domiciled in the United Kingdom.

OCI will contribute its European, North American and Global Distribution businesses to the new UK company in exchange for shares equal to a fixed 25.6 percent of new CF plus $700 million of consideration to be paid in a mix of cash or shares, of which $550 million is assumed to be paid in shares.

Additionally, the new CF will have an agreement to purchase a 45 percent interest in Natgasoline for around $500 million in cash. When the transaction is completed, CF shareholders will own 72.3 percent of the new company and OCI will own 27.7 percent.

The new corporation will operate under the name CF, led by existing CF management. The initial board of the new corporation will have 10 directors, including eight of CF's current directors.

The other two members will be Greg Heckman, former CEO of the Gavilon Group, LLC and current OCI N.V. board member, and Alan Heuberger, senior portfolio manager for Bill & Melinda Gates Investments.

The combined company will maintain its principal executive offices in Deerfield, Illinois and will be listed on the New York Stock Exchange under the ticker symbol CF.

CF expects to achieve $500 million in annual run-rate synergies from optimization of operations, capital and corporate structure.

As part of the agreement, Nassef Sawiris and other members of the Sawiris family, OCI's founding and controlling stockholders, have agreed to vote their shares in favor of the transaction.

They will together own approximately 15 percent of new CF's outstanding shares. The transaction is expected to close in 2016.

CF closed up 1.8 percent on Wednesday at $61.62.