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CF Industries Holdings axes tie-up plan after tax shake-up

Last updated: 00:43 24 May 2016 AEST, First published: 19:43 23 May 2016 AEST

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Illinois-based CF planned to merge with OCI's European, North American and global distribution operations

Fertilizer and gas groups CF Industries Holdings Inc (NYSE:CF) and OCI N.V. (Euronext:OCI) have ditched a planned tie-up due to a US tax clampdown.

Illinois-based CF had proposed to merge with the European, North American and global distribution businesses of OCI.

CF makes and distributes nitrogen products to farming and industrial customers from sites in Canada, the UK and US.

OCI, based in the Netherlands, produces and distributes natural gas-based fertilizers and industrial chemicals.

But moves by the US Treasury to prevent US companies moving their bases abroad to reduce their tax bill have scuppered the plan.

On April 4, the Treasury and the Internal Revenue Service (IRS) issued temporary and proposed regulations to further reduce the benefits of and limit the number of corporate tax inversions.

The pair said the move had “materially reduced the structural  synergies of the combination.”

They tried to find alternative deals but had decided to terminate the talks after failing to find a way forward.

CF’s president and chief executive Tony Will said: “Although the original deal created significant value for both parties, changes in the regulatory and commercial environments forced us to re-evaluate the combination and led us to the conclusion that terminating the agreement is in the best interests of CF Industries and its shareholders."

OCI chief executive Nassef Sawiris said: “Despite not having been able to reach an agreement on an alternative transaction or structure, we have the utmost respect for CF’s management and I would like to thank Tony and his team for all their effort.”

CF will pay OCI US$150mln in connection with the termination. CF's shares rose US$1.74, or 6%, to US$30.35 in early Wall Street trading.

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