CF Industries (CF) Terminates Merger Talks with Yara
CF Industries Holdings Inc. (CF) announced that it has terminated its merger talks with Norwegian fertilizer maker Yara International ASA (YARIY). The companies were unable to agree on terms of a transaction that met the requirements of all their respective shareholders.
Last month, both the companies were engaged in preliminary discussions regarding a possible "merger of equals" transaction.
The merger, if materialized, would have created a fertilizer powerhouse with complementary businesses and combined market capitalization of more than $27 billion, placing it next only to Potash Corp. (POT) – the world's biggest fertilizer company by capacity. The integrated entity would have become the world’s largest nitrogen fertilizer maker with annual sales of roughly $19 billion.
However, CF Industries believes that its business plan is strong enough and remains optimistic about increasing its cash flow generation once its capacity expansion projects in Louisiana and Iowa come online. Both projects are expected to expand the company’s production capacity by 25%. CF Industries plans to spend roughly $1.7 billion on capacity expansion projects this year.
CF Industries also remains confident of investing in high return projects and returning excess cash to shareholders, through dividends and a substantial share repurchase program, thus creating shareholder value.
CF Industries is enjoying the benefit of abundant natural gas (a major feedstock in producing nitrogen fertilizer) supply, driven by increased production of shale gas in North America. It should also gain from healthy U.S. corn plantations. More than 90 million acres of corn are expected to be planted next year, thereby driving up demand for nitrogen.
Currently, CF Industries carries a Zacks Rank #4 (Sell).
Another fertilizer company worth considering is Intrepid Potash, Inc. (IPI) holding a Zacks Rank #2 (Buy).
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