Yara, CF in talks to create $27 billion fertilizer giant

Reuters News
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Posted: Sep 23, 2014 5:55 AM

OSLO (Reuters) - Norway's Yara International <YAR.OL> is in talks with Chicago-based CF Industries <CF.N> about a possible merger of equals, the firms said on Tuesday, a deal that would create a fertilizer giant with market value over $27 billion.

"The discussions are at an early stage, and there can be no assurances that these discussions will result in any transaction," Yara said in a filing to the Oslo bourse.

The Norwegian company added that it was forced to go public because information about the talks had leaked.

Yara, with market capitalization of $14.8 billion, is the world's biggest nitrate based fertilizer firm, focusing its growth on North and South America. CF Industries is worth $12.7 billion, with output in the U.S. Midwest, Canada, Britain and Trinidad and Tobago.

A merged Yara and CF Industries would be nearly on par in market capitalization with Potash Corporation of Saskatchewan, which is now worth $28.9 billion.

Any deal would require the consent of the Norwegian government and possibly parliament, as the state holds 36.2 percent of the firm, plus an additional 5 percent through the state pension fund Folketrygdfondet.

The government said in June that is does not plan to cut its stake to less than 34 percent.

Yara shares surged 8.6 percent in early trade.

Global fertilizer margins have been under pressure in recent years, particularly from Chinese overproduction, and analysts said pressure could persist for several years.

With U.S. gas prices trading near historic lows, the firm has been working to build capacity in North America and plans to build an ammonia plant with Germany's BASF <BASFn.DE> in Texas to take advantage of lower raw material prices.

(This corrected version of the story fixes the day of week in first paragraph).

(Reporting by Balazs Koranyi, editing by Terje Solsvik/Keith Weir)