Netherlands-based Orascom Construction Industries (OCI NV) has announced tying up it’s US and European assets with leading US-based fertilisers company CF Industries Holdings, in a transaction valued at $8bn, OCI announced on Thursday.
The acquisition, which includes distribution networks of OCI, would create the world’s largest nitrogen fertiliser companies with 12 million nitrogen-equivalent nutrient tonnes of production capacity by mid-year 2016, according to the company.
Upon completion of the transaction, OCI would own approximately 27.7% of the new company and CF shareholders would own the remaining amount, approximately 72.3%, OCI said, adding that it will distribute a large proportion of the shares received in the merged company to its shareholders.
Both companies are expected to achieve nearly $500m in after-tax annual run-rate synergies from optimisation of operations, capital and corporate structure.
According to OCI, the new company will operate under the name of CF Industries and led by CF management, with an initial board of 10 directors. The company will be listed on the New York Stock Exchange under the ticker symbol CF and will be included in the S&P 500 Index.
The transaction is expected to close in 2016, OCI pointed out.
Following the completion of the deal, OCI will remain headquartered in the Netherlands and listed on the Euronext Amsterdam. OCI’s business will consist of a leading portfolio of industrial chemicals and nitrogen fertilisers, and the company will have operational production facilities in Egypt, Algeria and the Netherlands with total sellable capacity of approximately 4.8 mtpa, increasing to 6.5 mtpa in 2017.
“Combining our businesses with CF builds upon the company’s platform in Europe and expansive distribution network in North America, enhancing our collective scale and improving our ability to meet the needs of customers in the US and around the world,” said Nassef Sawiris, CEO of OCI NV.
Tony Will, President and Chief Executive Officer (CEO), CF Industries Holdings said the deal is a “great” outcome for US farmers “as we have another supply point that will ensure our critical products are delivered reliably and in-time to meet our customers’ needs”.
Following the announcement on 6 August, Netherlands Authority for the Financial Markets (AFM) announced that it has given an instruction to suspend trading in OCI NV, however, it was resumed on the same day after receiving a press release from the company.
On 20 July, OCI said that it is holding discussions for possible combinations or transactions, adding that no agreement has been reached yet. The company said that “there can be no assurance that these discussions will result in a definitive agreement”.
Significantly lower production in Egypt mainly contributed to the lower total volume produced by OCI. The lower domestic production saw OCI witness a 23.7% drop compared to the same period last year.
The company explained in May that ammonia and urea volumes were negatively affected by significantly lower production at our Egyptian operations Egyptian Fertilizers Company (EFC) and Egypt Basic Industries Corporation (EBIC), compared to the first quarter of 2014.
In June, Orascom Construction SAE and Siemens announced that they plan to build two combined cycle power plants in Egypt, each with a 4,800 MW power capacity. The first power plant will be located in Kafr El-Sheikh governorate, while the other will be built in the new capital city. The construction company stated that the contract value of each power plant is €2bn, while its share in the combined contracts amount to €1.6bn.