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Yara International and CF Industries in Merger Talks

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CF Industries terminates merger talks with Yara

Norway's Yara International and U.S.-based CF Industries Holdings Inc. said they are discussing a merger that would create a new, nearly $19 billion-a-year powerhouse in the global fertilizer business and extend the industry's recent run of consolidation.

A deal would create the world's biggest producer of nitrogen fertilizers, combining Yara's global distribution system with CF's proximity to low-cost natural gas—a key component in nitrogen fertilizer—as sliding crop prices and rising competition from China increase pressure on fertilizer makers.

A tie-up also could face regulatory scrutiny, analysts said, as the two companies have sizable combined market share in some countries.

The companies, in statements confirming the talks, said they are at an early stage and may not result in a deal. Yara spokesman Esben Tuman said the discussions are driven by a belief that the companies have complementary geographic focuses.

Yara, which had revenue of $13.4 billion last year, and CF Industries, whose 2013 revenue totaled $5.47 billion, have a combined market valuation of about $26.4 billion. That would rank a merged company just below the $28.8 billion market cap of Canadian fertilizer giant Potash Corp. of Saskatchewan, the world's largest producer of potash, another type of fertilizer that is made from minerals.

Yara and CF Industries both specialize in producing nitrogen fertilizers, which derives its main component, ammonia, primarily from natural gas. CF Industries, based in the Chicago suburb of Deerfield, Ill., has ridden the boom in U.S. natural-gas production, which has lowered costs for nitrogen fertilizer makers and promised a steadier supply.

To meet its production needs Yara has looked at ways to expand its ammonia production in Canada and the U.S. The company in May announced plans to build an ammonia plant in Texas with German chemical giant BASF.