CVR Partners LP and Rentech Nitrogen Partners, L.P. (NYSE: RNF) announced today the execution of a definitive merger agreement under which CVR Partners will acquire all outstanding units of Rentech Nitrogen. The combination excludes Rentech Nitrogen’s Pasadena facility, which will be retained by current holders of Rentech Nitrogen, or sold separately for their benefit. Total consideration for Rentech Nitrogen excluding the Pasadena facility is $533 million, implying a total enterprise value of approximately $839 million, based on closing prices on August 7, 2015. The transaction is the culmination of a strategic review process publicly announced by Rentech Nitrogen on February 17, 2015.
Under the terms of the transaction, each outstanding common unit of Rentech Nitrogen will be exchanged for 1.04 units of CVR Partners and $2.57 of cash. The value of the CVR Partners units plus the cash consideration, which excludes the value of the Pasadena facility, represents a 20.3 percent premium to the unit value implied from the unaffected exchange ratio on February 16, 2015, one day before Rentech Nitrogen announced its process to explore strategic alternatives; a 32.9 percent premium at the current exchange ratio; or a 14.1 percent premium to the unit value implied from the last 30-day volume weighted average price exchange ratio through August 7, 2015. Any value realized from the sale of the Pasadena facility would add to such premium.
Upon closing of the transaction, Rentech Nitrogen’s unitholders (including Rentech Inc.) will own approximately 40.5 million units, or 35.6 percent, of the combined partnership. As part of the transaction, CVR Partners will assume or refinance Rentech Nitrogen’s net debt, which was approximately $307 million as of March 31, 2015.
"The merger of CVR Partners and Rentech Nitrogen Partners creates a new leader in the growing nitrogen fertilizer industry. Once the merger is complete, we will be the second largest producer of urea ammonium nitrate (UAN) in North America," said Jack Lipinski, executive chairman of CVR Partners. "In addition to enhancing our current attractive market position, we expect the merger will be double-digit accretive to distributable cash per unit before synergies. The combination of our two strategically located fertilizer assets in Kansas and Illinois, a strong combined balance sheet and highly experienced management teams positions the merged companies to generate long-term value for unitholders."
"The addition of Rentech Nitrogen’s East Dubuque fertilizer facility increases our scale and diversifies our geography and raw material feedstock," said Mark Pytosh, chief executive officer of CVR Partners. "Our customers will benefit from the expanded availability and variety of nitrogen fertilizer products manufactured at the two facilities. The merger also expands our footprint into the upper Corn Belt region, which has the largest concentration of users in the U.S. for the direct application of nitrogen fertilizer products.
"The merger of CVR Partners and Rentech Nitrogen Partners brings significant value to our respective unitholders, customers and employees," Pytosh said. "We welcome the talented and experienced Rentech Nitrogen employees to CVR Partners."
"We believe this combination with CVR Partners is a compelling opportunity to create value for Rentech Nitrogen’s unitholders. The transaction is structured to provide our unitholders with significant value, as well as the chance to participate in future value creation in a combined partnership that is well-positioned for success," said Keith Forman, chief executive officer of Rentech Nitrogen. "We believe that the resulting company will benefit from larger scale; diversification of plants, feedstocks, and markets; and reduced costs. We intend to immediately return to a focused pr