Norway's Yara International and CF Industries said they are discussing a merger that would create a ne w, 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.
A CF Industries spokesman didn't respond to requests for comment.
Share prices of both companies rose Tuesday after the firms disclosed the talks. 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.
Fertilizer companies have done a string of deals in recent years, to reduce costs and gain traction overseas. Yara recently acquired fertilizer producer OFD Holding Inc., strengthening its Latin American operations after last year spending $750 million to buy the Brazilian fertilizer operations of grain-trading firm Bunge Ltd.
