OCI N.V. (NYSE Euronext: OCI) and CF Industries Holdings, Inc. (NYSE: CF) today announced that they have entered into a definitive agreement to combine OCI’s North American, European and Global Distribution businesses with CF Industries’ global assets in a transaction valued at approximately US$ 8 billion, based on CF’s current share price, including the assumption of approximately US$ 1.95 billion in net debt. Upon completion of the transaction and based on current share prices, OCI will receive shares equal to a fixed 25.6% of the combined group and an additional US$ 1,218 million of consideration to be paid in a mix of cash and shares. Greg Heckman, currently a member of the Board of Directors of OCI N.V. and former President and Chief Executive Officer of The Gavilon Group, LLC (Gavilon) and Alan Heuberger, Senior Manager at Bill & Melinda Gates Investments (BMGI), will join the Board of Directors of the combined entity.
The proposed transaction was unanimously approved by the Boards of Directors of both companies.
“This is a terrific opportunity for the shareholders of both companies, with mid- to high-teens cash flow accretion,” said Tony Will, president and chief executive officer, CF Industries Holdings, Inc. “This is also a great outcome for U.S. farmers as we have another supply point that will ensure our critical products are delivered reliably and in-time to meet our customers’ needs.”
“Combining our businesses with CF builds upon the company’s platform in Europe and expansive distribution network in North America, enhancing our collective scale and improving our ability to meet the needs of customers in the U.S. and around the world.” said Nassef Sawiris, chief executive officer, OCI. “As significant owners in the combined entity, our shareholders will benefit from the ongoing value creation of the business. The transaction will also provide OCI with the financial flexibility to fully unlock the potential of its ongoing businesses and pursue new investment opportunities in order to launch a new phase of value creation.”
Compelling strategic rationale
Under the terms of the agreement, CF will become a subsidiary of a new holding company domiciled in the United Kingdom, where CF is the largest fertilizer producer following its recent acquisition of GrowHow. OCI will contribute the Dutch holding companies owning OCI Nitrogen, Iowa Fertilizer Company, OCI’s global distribution businesses (OCI Fertilizer Trading Ltd and OCI Fertilizer Trade & Supply BV) and OCI’s 80% stake in OCI Partners LP to the new UK company in exchange for shares equal to a fixed 25.6% of the new CF plus US$ 700 million of consideration to be paid in a mix of cash or shares at CF’s discretion. OCI will also sell to the new CF a 45% interest in Natgasoline for US$ 518 million in cash, together with a call option to acquire the remaining interest, exercisable upon completion of the project in 2017. Upon completion of the transaction and based on the current share price, OCI would own approximately 27.7% of the new company, subject to the convertible bond adjustment referenced below, and CF shareholders would own the remaining approximately 72.3%. OCI will distribute a large proportion of the shares received in the combined entity to its shareholders. Final consideration mix (cash and CF stock) and resulting ownership split will be dependent in part on the CF share price at the time of closing.
The companies expect to achieve approximately US$ 500 million in after-tax annual run-rate synergies from optimization of operations, capital and corporate structure.
The new corporation will operate under the CF Industries name and be led by current CF management. The initial board of the new corporation will have 10 directors, consisting of eight of CF’s current directors, as well as Greg Heckman and Alan Heuberger. The combined company will have its principal executive offices in Deerfield, Illinois. It will be listed on the New York Stock Exchange under the ticker symbol CF and will be included in the S&P 500 Index.
The transaction requires the approval of shareholders of both OCI and CF and is subject to receipt of certain regulatory approvals and other customary closing conditions. The transaction is expected to close in 2016.
OCI N.V.’s convertible bond
In accordance with condition 6.(m) of the terms and conditions of OCI N.V.’s 3.375% 2018 convertible bond, OCI N.V. and the bond’s Trustee will take steps such that all bonds still outstanding at closing will transfer to and become convertible into shares of the new CF. Some features of the OCI convertible bonds such as the maturity, currency, nominal amount and coupon will remain identical to those of the current instrument. This process, including the determination of a new conversion price for the bonds upon transfer, will be completed by an Independent Financial Advisor to be appointed before closing of the transaction. There will be an adjustment to OCI N.V.’s 27.7% ownership in the new CF to account for the transfer of the convertible bond.
Zaoui & Co. is acting as lead financial advisor to OCI. Bank of America Merrill Lynch and JP Morgan are also providing financial advice to OCI. Allen & Company is advising Nassef Sawiris and the Sawiris family. Cleary Gottlieb Steen & Hamilton LLP and Allen & Overy LLP are acting as legal advisors to OCI.
Morgan Stanley & Co. LLC and Goldman, Sachs & Co. are serving as financial advisors to CF Industries on the transaction. Skadden, Arps, Slate, Meagher & Flom LLP is acting as its legal advisor.
OCI’s businesses following completion of the transaction
Following the completion of the transaction, OCI’s business will consist of a leading portfolio of industrial chemicals and nitrogen fertilizers. The company will remain headquartered in the Netherlands and will remain listed on the Euronext Amsterdam.
The Group will have operational production facilities in Egypt, Algeria and the Netherlands with total sellable capacity of approximately 4.8 mtpa, increasing to 6.5 mtpa in 2017:
Entrepreneurial investment track record and OCI’s growth strategy post-transaction
OCI and its predecessor Orascom Construction Industries have undergone major transformations through investments in a number of value accretive businesses in the past 15 years, delivering an IRR for shareholders in excess of 40% since its IPO in 1999.
OCI’s management team remains at the helm of the Company and fully committed to driving the Company’s strategy through the next phase of growth and value creation. OCI’s strategy continues to focus on evaluating investment opportunities where it can benefit from global natural gas price advantages and its expertise in the natural gas value chain.
OCI’s strategy post-transaction is supported by:
Conference Call Information
A replay of the conference call hosted by Nassef Sawiris, Chief Executive Officer of OCI N.V., is available until 10 September 2015.
Standard International Dial-in: +44 (0) 1452 550 000
Netherlands FreeCall Dial-in (land-lines only): 08000 234 610
US FreeCall Dial-in: 1 (866) 247 4222
Conference ID: 7228630
 Of the US$ 1,218 million consideration to be settled in cash and shares, US$ 518 million relates to the acquisition of a 45% stake in Natgasoline and will be settled in cash, and US$ 700 million will be settled in cash or shares at CF’s election.
 Assuming that US$ 550 million out of the US$ 700 million additional consideration is settled in shares.