CF Industries Embarks on Key Ventures in 2Q15
Details of the venture
On August 12, 2015, CF Industries Holdings (CF) and CHS (CHSCP) announced that they have agreed to enter into a strategic venture. CHS, the nation’s leading farmer-owned cooperative, will make an equity investment in a wholly owned CF subsidiary and also enter into a supply agreement. Under the supply agreement, CHS will be entitled to purchase up to 1.7 million tons of UAN and urea annually at market prices. CHS will purchase a minority equity interest in CF Industries Nitrogen (or CF Nitrogen) for $2.8 billion and be entitled to semi-annual profit distributions from CF Nitrogen.
Tony Will, president and CEO of CF Industries, expressed optimism regarding the venture, stating that it represents tremendous strategic value to both of the companies. He also said, “In the past, we have entered into long-term relationships with industry leaders Mosaic and Orica, and this venture with CHS, an industry leader in agriculture, is the next logical step. This transaction matches us with a reliable partner that will take ratable delivery of product across the year, supported by an attractive valuation.”
The companies’ main competitors are potash miner Potash Corporation of Saskatchewan (POT) and Monsanto (MON). CF Industries Holdings (CF) had positive year-to-date returns of 13.08% compared to Monsanto (MON) with -13.58% and Potash Corporation (POT) with -25.96%. The Materials Select Sector SPDR ETF (XLB) invests 2.49% in CF Industries, while the SPDR S&P 500 ETF (SPY) invests 0.08% of its portfolio in CF.
About CF Industries
CF Industries Holdings is headquartered in Deerfield, Illinois. Through its subsidiaries, it is a significant player in the manufacturing and distribution of nitrogen products, serving both agricultural and industrial customers, cooperatives, and independent fertilizer distributors.
About CHS
CHS is a global agribusiness owned by farmers, ranchers, and cooperatives across the United States. Diversified in energy, grains, and foods, CHS helps its customers, farmer-owners, and other stakeholders grow their businesses through its domestic and global operations.
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