OCI OCI NV

By Ian Walker and Maarten van Tartwijk 

U.S. fertilizer maker CF Industries Holdings Inc. and Dutch rival OCI NV called off their planned $8 billion merger, the latest multibillion-dollar transaction to run afoul of changes to U.S. tax rules designed to restrict so-called inversion deals.

The companies said they were unable to come up with a structure for a deal to combine CF Industries with some of OCI's operations that would create value for shareholders, citing a tougher regulatory and commercial environment.

"There was no meeting of the minds, in terms of valuations," said CF Industries Chief Executive Tony Will on Monday. He said CF Industries was eager to restart its share buyback program after a long hiatus during the deal talks.

CF Industries will pay a $150 million breakup fee; it has $2.7 billion in cash. Shares in OCI fell more than 9% in Amsterdam after the announcement. CF Industries' stock was up 4.4% at 4 p.m. trading in New York on Monday.

OCI Chief Executive Nassef Sawiris said in a joint statement that he hoped to explore "alternative ways of collaboration or structures" with CF Industries, though Mr. Will later played down the prospect because of valuations.

"For right now, I think we're both headed in our own direction," Mr. Will said on a conference call.

The decision is the latest deal to fall apart after the U.S. Treasury last month announced further administrative action against inversions, which had helped drive mergers-and-acquisitions activity to record highs as U.S. companies looked to foreign deal making to lower their tax bill.

In an inversion deal, U.S. companies moved their corporate headquarters to a country with a more favorable tax regime, typically through merging with a smaller firm. It enabled them to repatriate foreign profits without paying U.S. taxes.

The crackdown on tax-fueled mergers led Pfizer Inc. and Allergan PLC last month to abandon their planned $150 billion merger, which would have moved the biggest drug company in the U.S. to Ireland. The companies said their decision was driven by adverse changes in tax law.

CF Industries of Deerfield, Ill., and OCI initially planned to register the combined company in the U.K., lowering its overall tax rate to 20% from 34%. They subsequently agreed in December to move tax residency to the Netherlands, where the corporate tax rate is 25%, to satisfy tougher inversion rules put in place by the U.S. Treasury last November.

CF Industries sought to acquire the European and North American operations of OCI as well as its global distribution assets. OCI was established in Egypt by the Sawiris, a prominent Egyptian business family, but it is incorporated and listed in the Netherlands.

A deal would have led to a global nitrogen-fertilizer giant. CF Industries is one of the world's largest manufacturers and distributors of nitrogen fertilizers for agricultural purposes. OCI, which operates in Egypt, Algeria, the Netherlands and the U.S., makes natural-gas-based fertilizers and industrial chemicals.

The deal's collapse comes as consolidation has intensified in the agrochemicals sector. Germany's Bayer AG has made an unsolicited $62 billion bid for seeds supplier Monsanto Co. Swiss pesticide and seeds company Syngenta AG agreed to a $43 billion takeover by China National Chemical Corp., known as ChemChina, earlier this year.

Write to Ian Walker at ian.walker@wsj.com and Maarten van Tartwijk at maarten.vantartwijk@wsj.com

Corrections & Amplifications

CF Industries is based in Deerfield, Ill. A previous version of this article misspelled Deerfield.

(END) Dow Jones Newswires

May 23, 2016 16:26 ET (20:26 GMT)

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