Reuters — Nitrogen fertilizer producer CVR Partners said Monday it would buy Rentech Nitrogen Partners for US$533 million, excluding debt, as global fertilizer makers scale up at a time when increased supplies weigh on nitrogen prices.
The deal creates North America’s fifth-largest nitrogen producer, vaulting the companies past Norway-based Yara International. It comes less than a week after CF Industries said it would buy OCI NV’s North American and European plants for $6 billion, making CF the world’s largest publicly traded nitrogen company (all figures US$).
The U.S. is the world’s biggest corn producer, but a net importer of critical fertilizer nitrogen. Those conditions and North America’s relatively cheap natural gas, a key feedstock for nitrogen production, have encouraged others such as Koch Industries and Agrium to expand.
Rentech Nitrogen shareholders will receive 1.04 units of CVR Partners and $2.57 cash for each unit held. It represents a premium of 33 per cent to the company’s Friday closing price.
The deal gives CVR a second nitrogen plant, at East Dubuque, Ill., but excludes Rentech Nitrogen’s plant in Pasadena, Tex.
Rentech Nitrogen shares jumped 26 per cent to $13 in New York, while CVR stock dipped 2.3 per cent to $10.44.
Rentech Nitrogen, a master limited partnership of Rentech Inc., will own 40.5 million units, or 35.6 per cent of the combined company. Rentech Inc. also operates wood pelleting and processing businesses, including Canadian plants at Atikokan and Wawa, Ont.
CVR Partners, owned by Carl Icahn-controlled CVR Energy, will refinance Rentech Nitrogen’s net debt of about $307 million.
The deal is expected to close by the end of 2015 and no later than May 2016, the companies said.
Sugar Land, Tex.-based CVR Partners said it expects the deal to be double-digit accretive to distributable cash per unit before synergies.
Rentech Nitrogen said it planned to sell the Pasadena facility before the closing of the merger with CVR Partners.
Saskatoon-based PotashCorp, the world’s second-largest potash miner, has proposed to acquire German salt and fertilizer company K+S AG.
— Reporting for Reuters by Rishika Sadam and Amrutha Gayathri in Bangalore; additional reporting for Reuters by Rod Nickel in Winnipeg.