CF Industries Holdings Inc. and Keytrade AG announced Sept. 17 that CF has agreed to acquire a 50 percent ownership position in Keytrade, a 3 million mt/y global fertilizer trading organization headquartered near Zurich, Switzerland. The deal, which is expected to close in the fourth quarter 2007, has a purchase price of US$25 million.
“We are excited to be combining the capabilities of CF Industries and Keytrade,” said CF Chairman and CEO Stephen Wilson. “CF Industries has had a long, constructive relationship with Melih Keyman, the chairman and chief executive officer of Keytrade, and with his partners and team. We look forward to working together to expand our businesses for the benefit of all our shareholders. This strategic partnership provides CF Industries with a global platform from which to pursue our objectives of growth and diversification.”
“From Keytrade’s perspective, this partnership will help ensure growth potential beyond our trading activities,” said Melih Keyman, Keytrade chairman and CEO. “With our new strategic partner, we believe that Keytrade will be able to serve the needs of our trading partners much better with wider product support. We, too, are excited at the prospect of combining our global trading system with CF Industries’ strong production base and international aspirations.”
Keyman, a founder of Keytrade, will continue as CEO of the company and will run the organization on a day-to-day basis together with his founding partners Andreas Vaterlaus, Sergei Rudakov, and Yang Baoheng. Founded in 1997, the company buys fertilizer – primarily nitrogen products, but also phosphate and potash – in 35 countries and markets it in 65 countries. The company has extensive commercial relationships in both fertilizer supply and market regions.
Initially, CF will work exclusively with Keytrade to export phosphate fertilizer and import UAN solution. The companies are exploring additional opportunities to work together, including sourcing other products to serve the North American market, and establishing production, distribution, and/or marketing presence in attractive markets overseas.
As a result of the acquisition and Keytrade’s role in exclusively handling CF phosphate exports, CF has given notice to PhosChem, the U.S. phosphate export organization, that it will be leaving its membership. CF has only been a PhosChem member for about a year, joining Oct. 1, 2006 (GM June 12, p. 6). CF expects Keytrade will be handling phosphate exports by the beginning of 2008. CF spokesman Chuck Nekvasil told Green Markets that CF has no issues with PhosChem, and that this transaction simply makes better sense for CF and its shareholders in the long run.
Many attendees at last week’s TFI World Conference in Boston greeted the CF/Keytrade news with surprise. Some wondered why CF would need this investment, saying that it has used other traders in the past and it could readily do so in the future. However, CF said the acquisition quickly gets the company an international presence of its own. “We believe that a 50 percent ownership in Keytrade can provide CF Industries with an immediate global platform from which to pursue our growth and diversification objectives,” Nekvasil told Green Markets. “Strategically, we believe it’s important to develop such a platform to improve our global sourcing capabilities and market insights and to enter new markets and establish new offshore distribution channels. We believe Keytrade provides a unique opportunity for us to acquire an extensive global capability immediately.”
Wilson has mentioned the need to go international as a priority in past telephone conferences with analysts.
“We looked at the option of developing a direct CF Industries presence internally, but we believe that this acquisition, which gives us an extensive global capability immediately, makes much more sense,” added Nekvasil.
While some sources were taken aback by CF paying $25 million for a half-stake in a trader, others were not, noting that CF is having a banner year and that Wall Street is likely looking for it to spend money or funnel it back to shareholders as a dividend. Likewise, it has seen a huge surge in stock prices. CF shares closed at around $70.00 on Thursday Sept. 20, versus a year-ago number of around $17.00.
Another source noted that CF hired Anthony Will as vice president, corporate development, back in April. His mandate was to execute initiatives that will help CF achieve strategic objectives in the areas of growth and diversification (GM April 9, p. 9).