CF, OCI to Move Tax Residency to Netherlands

By Lisa Beilfuss 

Fertilizer maker CF Industries and Dutch rival OCI NV, which agreed to merge in August, said they would move the tax residency of the combined company to the Netherlands from the U.K. in a move to satisfy new inversion rules put in place by the U.S. Treasury.

The $8 billion tie up is a so-called tax inversion deal that would create a global nitrogen-fertilizer giant with a significantly lower tax bill. When the deal was signed, Illinois-based CF said it would lower its overall tax rate to 20% from 34% by moving its address abroad.

Inversions have helped drive mergers-and-acquisitions activity to record highs as companies have looked to foreign deal making for tax savings. In November, the U.S. Treasury unveiled new rules that beefed up existing laws governing inversion deals. The new rules apply to deals in which the U.S. company's shareholders end up with more than 60% of the combined entity. Under the CF and OCI deal, CF shareholders would own 72.3% of the merged company.

The new rules also make it harder for companies to do what the Treasury calls "cherry-picking," which is finding an address in a country with a favorable tax code. Companies are now more limited to taking new addresses in the country where the merger partner is organized.

By being a tax resident of the Netherlands, where OCI is incorporated, the new holding company would satisfy the requirements of the U.S. Department of the Treasury's notice issued on Nov. 19, CF said.

The company said the amended merger agreement doesn't affect timing of the deal's completion, which is expected by mid-2016.

Write to Lisa Beilfuss at [e-mail]

(END) Dow Jones Newswires

December 21, 2015 08:46 ET (13:46 GMT)

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