Yara in £2.6bn US deal

City A.M. Reporter
Norway’s Yara has agreed to buy Terra Industries for $4.1bn (£2.6bn) to create a world leading fertiliser producer and boost its US presence, as rivals look to join forces to gain size and reach.

Last month US-based CF Industries withdrew its year-long hostile bid to buy Terra. That battle, along with other acquisitions and merger rumours have kept the fertilizer sector in the investor spotlight, despite a sharp fall in prices last year as the global economic crisis hit. Analysts and producers expect a major rebound in demand in 2010 as farmers rush to replenish their soil nutrient levels.

Yara chief executive Joergen Ole Haslestad said the all-cash acquisition of Terra “will create a clear global No. 1 in the fertiliser industry”.

Energy-intensive fertiliser producers in the US have become increasingly attractive, Yara said, due to “structural changes” in US energy markets as a boom in unconventional gas output curbs US natural gas prices.

Norway’s national insurance fund Folketrygdfondet, which holds 6.57 per cent in Yara, will underwrite and subscribe to its share of the rights issue. The remainder is underwritten by Citi, Deutsche Bank and Nordea.