CF Industries in Merger Talks with Dutch Fertilizer Maker OCI -- Update

By Dana Mattioli, Dana Cimilluca and Liz Hoffman 

Fertilizer maker CF Industries Holdings Inc. is in advanced talks for a merger deal with Dutch counterpart OCI NV, as chemical companies join the global takeover wave.

CF, of Deerfield, Ill., and OCI are in discussions about a tie-up that could be reached as early as this month, according to people familiar with the matter.

The contours of the deal the companies are discussing and its possible terms are unclear, and a transaction may not materialize. It may be structured as a so-called inversion -- a type of combination in which the U.S. company moves its tax headquarters abroad, two of the people said.

OCI had a market value of EUR5.7 billion ($6.2 billion) Friday. CF's was $14.1 billion.

CF is one of the world's largest manufacturers and distributors of nitrogen fertilizers used for agricultural purposes, according to its website. In 2014, the company had $4.74 billion in sales, a 13.4% decrease from 2013 partly as a result of unfavorable weather, and $1.39 billion in net earnings.

OCI makes natural-gas-based fertilizers and industrial chemicals. The company, which has production facilities in the Netherlands, Egypt, Algeria and the U.S., posted $329 million in net income on about $2.7 billion in revenue in 2014, both up from the year before. It spun off its engineering-and-construction unit earlier this year.

OCI traces its roots to the 1950s when Onsi Sawiris founded a construction company in Egypt, according to the company's website. Today, the company's chief executive is Nassef Sawiris, who is a member of one of that country's most prominent business families.

A wave of companies struck inversion deals last year before the U.S. Treasury put in place rules aimed at curbing them, in an effort to keep tax revenue from migrating abroad. But the moves didn't completely eradicate the deals.

There has been a flurry of takeover activity among chemical companies of late. They have announced $51 billion of deals globally so far in 2015, up from $46 billion in the same period last year and $15.2 billion year-to-date in 2013, according to Dealogic.

Last year, CF held merger talks with Norway's Yara International ASA in an attempt to create the world's largest nitrogen-fertilizer company. The talks fell apart as the two sides failed to agree on terms.

CF acquired Terra Industries Inc. in 2010 after a year-long chase that involved a four-way takeover battle including Yara and Canada's Agrium Inc. The Terra acquisition, for about $4.7 billion, is CF's largest.

Agribusiness giant Monsanto Co. is currently attempting to buy Swiss rival Syngenta AG, which has a market value of 35.7 billion Swiss francs ($37.2 billion). The deal that St. Louis-based Monsanto has proposed -- and that Syngenta is resisting -- would be an inversion that could move Monsanto's headquarters to the U.K. or to another country with a more favorable corporate-tax regime.

The chemical-dealmaking surge is part of a broader upswing, with announced global takeover volume so far this year reaching $2.44 trillion, according to Dealogic. That puts it on pace to challenge 2007 as the busiest year ever for mergers and acquisitions.

One factor driving the activity that could be in play in the CF-OCI talks is a strong dollar.

Write to Dana Mattioli at [e-mail], Dana Cimilluca at [e-mail] and Liz Hoffman at [e-mail]

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