U.S. fertilizer maker CF Industries Holdings Inc. said on Thursday it will buy OCI NV's North American and European plants for $6 billion, making CF the world's largest publicly traded nitrogen company.
The stock and cash deal comes 10 months after CF's merger talks with Yara International ASA collapsed. It marks the largest fertilizer M&A deal since 2011 and comes as big global supplies weigh on nitrogen prices.
CF, which is assuming $2 billion of OCI's debt, will become a subsidiary of a new holding company based in the United Kingdom. By moving headquarters, CF will pay a lower tax rate, which Chief Executive Tony Will told analysts would be part of $500 million in total synergies, along with savings on operations.
CF shares in New York rose 4 percent to $64.09 and OCI's Amsterdam-listed shares climbed 3.6 percent to about 31.40 euros.
Including CF's U.S. expansions and OCI's plants in the Netherlands and Iowa, CF will increase nitrogen capacity by 65 percent over two years.
Others, however, such as Koch Industries and Agrium Inc. are also expanding capacity.
"Even after all the capacity being contemplated in North America comes online, the U.S. is still going to be importing about 25 percent of our total nitrogen requirements," Will said.
"The market needs all of the product."
Asked about possible U.S. tax concerns, Will said OCI insisted the deal include a European headquarters.
Buying OCI's Iowa plant, which is under construction, will eliminate a rival supplier to U.S. farmers, but Will said he didn't expect significant antitrust concerns from regulators.
CF shareholders will own 72.3 percent of the new company, which will be led by CF management. OCI will own the rest.
CF, a cooperative until going public in 2005, is also buying OCI's global distribution business based in Dubai and its interest in an ammonia and methanol complex in Beaumont, Texas. The deal excludes OCI's production plants in Egypt and Algeria.
OCI said last November it planned to spin off its construction and engineering business and list it in Egypt and the United Arab Emirates.
Morgan Stanley & Co LLC and Goldman, Sachs & Co are CF's financial advisers. Skadden, Arps, Slate, Meagher & Flom LLP is the legal adviser.
Zaoui & Co is OCI's lead financial adviser, with Bank of America Merrill Lynch and JP Morgan also advising.
Cleary Gottlieb Steen & Hamilton LLP and Allen & Overy LLP are OCI's legal advisers.