Yara and CF Industries in talks to create world’s largest fertilizer company

Fertilizer plant
Source: DollarPhotoClub

Norway’s Yara International ASA (YAR) and Illinois-based CF Industries Holdings Inc. (CF) said yesterday they’re in preliminary talks about creating the largest nitrogen fertilizer company in the world – Bloomberg reported yesterday.

Cheap gas derived from shale has created a boom in the chemical industry, with the Washington, DC-based chemical industry trade group recently saing that the U.S. Chemical Production Regional Index (CPRI) gained 0.5% in August after a 0.4% rise a month ago, manifesting that the industry remains on the road to recovery in the second half.

Overall chemical production went up 1.8% year over year in August with gains recorded across all regions.

Yara has been trying to increase its share of revenues from the American market from the current sixteen per cent by potentially entering into a JV with the German giant BASF in Texas. It earlier tried unsuccessfully to purchase erra Industries Inc. but was trumped by CF Industries Holdings. CF’s $4.7 billion deal to take over Terra closed in 2010.

“To meet their ambition of being global, Yara needs to have a meaningful business in the U.S.,” olin Isaac, an analyst at Atlantic Equities LLP in London told Bloomberg.

All of CF’s production and distribution assets are in North America. It plans to add two new U.S. nitrogen-fertilizer plants, in Louisiana and Iowa, which according to Mark Gulley, an analyst at BGC Financial LP in New York, will raise its output by 28 percent.

Both companies said yesterday they’re discussing a “merger of equals” and that there’s no guarantee of a deal. A combined CF-Yara would have about $19 billion in sales, more than any other fertilizer company.

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