CF Industries buy JV partner Yara’s stake in GrowHow $580 mn

CF Industries to buy JV partner Yara’s stake in GrowHow for $580 mn

10:09 AM, 1st July 2015
CF Industries to buy JV partner Yara’s stake in GrowHow for $580 mn

DEERFIELD, US: CF Industries Holdings Inc said that it has agreed with Yara International ASA to acquire its 50 percent equity interest in GrowHow UK Ltd for total cash consideration of $580 million, making GrowHow a wholly owned subsidiary. At closing, the GrowHow business will be consolidated into CF Industries with a cash free, debt free balance sheet. GrowHow owns and operates nitrogen production facilities in Ince and Billingham, UK.

The completion of the transaction is expected to occur later this year, CF said.

Yara and CF Industries have each owned 50 percent of GrowHow since 2007 and 2010 respectively. A shoot-out process defined in the shareholder agreement was triggered early 2015 and both Yara and CF Industries have bid for the assets during this process.

GrowHow has two production sites in Ince and Billingham with a total production capacity of approximately 0.8 million tonne of ammonia, 1.1 million tonne of ammonium nitrate (AN) and 0.5 million tonne of compound NPK. With limited export possibilities, GrowHow primarily serves the UK fertilizer market. In 2014 GrowHow delivered an EBITDA of $156 million based on IFRS.

“The operations have an advantaged position in an import-dependent region. We know GrowHow well and expect a mid-teens return profile for the acquisition. The purchase of the remaining interest in GrowHow is a continuation of CF Industries’ track record of pursuing shareholder value-creating capital deployment,” said Tony Will, president and chief executive officer, CF Industries Holdings Inc.

“The final bid from CF represents an attractive value to Yara. We remain dedicated to British agriculture and look forward to continue to work with UK farmers to increase their yield and profitability with our high quality products and services. Furthermore, Yara’s growth strategy remains on track, as we work hard both to deliver already committed projects and to develop our pipeline of new opportunities,” said Torgeir Kvidal, president and CEO, Yara.

As of 31 May, prior to purchase accounting and on a US GAAP basis, GrowHow had total inventories of £66 million, receivables of £41 million, and fixed assets of £195 million. The company also had current liabilities of £43 million, long-term payables of £14 million, and a net pension deficit of £90 million.

The UK is dependent on imports of nitrogen to meet its consumption demands. Nitrogen imports primarily consist of AN and urea with ammonia accounting for a negligible portion of imports. Currently, imports of AN to the UK make up approximately 45 percent (700,000 tonne) of supply. Additionally, UK natural gas costs have fallen meaningfully along with oil prices. In terms of delivered cost of AN to the UK, GrowHow is positioned at the low end of the UK supply curve.

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