CF Industries, Yara International in talks to create global fertilizer behemoth

DEERFIELD, Ill. - CF Industries is in preliminary talks with Norway's Yara International about a possible merger that would create a mammoth player in the fertilizer industry.

The combined company would have a market capitalization of more than $26 billion, second only to Potash Corp. of Canada. However, it would have annual sales of about $20 billion, almost three times that of Potash.

Yara International ASA confirmed the talks Tuesday, but both companies say there is no guarantee that a deal will be completed.

Producing fertilizer is an extremely energy-intensive process and natural gas is a huge feedstock in the industry. A tie-up with CF Industries Holdings Inc., based in Deerfield, Illinois, could give Yara easier access to cheap U.S. natural gas supplies.

And merger talks between the two are occurring in the midst of a global agricultural boom.

The U.S. Department of Agriculture this month said that corn and soybean farmers will reap the largest harvest ever this year. There is an aggressive push to ramp up grain and livestock production in China, India and other developing countries around the globe.

While the deal could lock in cheap energy prices for Yara, it would open up global markets to CF Industries. Yara has a broad, global presence, with facilities and warehouses in dozens of countries and sales to more than 150 countries.

CF concentrates on nitrogen fertilizer manufacturing and distribution. It has seven nitrogen fertilizer manufacturing complexes in the central U.S. and Canada and a network of fertilizer distribution terminals and warehouses mostly in the Midwest.

Shares of CF Industries climbed more than 7 per cent before the opening bell Tuesday.