CF Industries Holdings Inc. said Aug. 2 that it has entered into a definitive agreement with Glencore International plc to acquire its 34 percent stake in Canadian Fertilizers Ltd. (CFL), currently owned by Viterra Inc., for total cash consideration of C$915 million, subject to certain adjustments. CFL owns the largest nitrogen fertilizer complex in Canada, located in Medicine Hat, Alberta. This will give CF, already the majority owner, 100 percent of CFL.
“This acquisition is a low-risk expansion of our nitrogen supply capability, as we have operated the complex for over 35 years. It will add approximately 425,000 gross tons of ammonia and 275,000 tons of urea per year to our nitrogen production capacity in a region with low natural gas costs,” said CF Chairman and CEO Stephen Wilson. The Medicine Hat complex has two ammonia plants with 1,250,000 st/y of production capacity and a urea plant with 810,000 st/y of production capacity.
Agrium Inc., which was to take the minority CFL stake as part of its acquisition from Glencore of the bulk of Viterra’s retail assets, said that it reached an agreement for Glencore to make the sale to CF. Agrium said this significantly reduces the amount it will pay for the retail business, and also removes uncertainties on a couple of fronts. One of those was regulatory, as Canadian authorities are still to sign off on Agrium’s purchase of the Viterra assets. Some had objected to Agrium’s stance as both a major producer and retailer, even though the company argues that it operates these two divisions separately.
Agrium says the resulting net purchase price for the portion related to the retail business is estimated to be about $175 million plus approximately $400 million in retail working capital, or a combined $575 million. This compares to an original $1.65 billion for the retail assets plus the CFL stake.
Agrium noted that Viterra retail EBITDA in 2011 was $100 million. Agrium is buying approximately 90 percent of Viterra’s retail business.
In other news, Agrium says the sale of the CFL stake has provided an opportunity to return excess capital to shareholders. As a result, the company’s board has authorized the making of a Dutch auction substantial issuer bid to repurchase $900 million of its outstanding common shares. The bid is expected to commence in early September and be completed by mid-October. The maximum and minimum price that shareholders may select under the bid will be determined in the context of the market price of Agrium common shares at the time of the commencement of the bid.