CF Industries, Yara International end merger talks

(Repeats to additional subscribers)

By Soyoung Kim and Kanika Sikka

Oct 16 (Reuters) - CF Industries Holdings Inc ended merger talks with Norway's Yara International ASA after the companies failed to agree on terms of a deal that would have created a global fertilizer concern with an enterprise value approaching $30 billion.

Chicago-based CF and Yara said last month they were in early-stage talks about a "merger of equals" that would challenge the world's largest fertilizer producer, Canada's Potash Corp of Saskatchewan, in an oversupplied and fragmented market.

But the discussions ended after CF concluded that a proposed all-stock merger, which would have given the two companies a roughly 50-50 ownership, did not adequately reflect the value of the U.S. company's significant near-term capacity expansions, said a person familiar with the matter.

Despite having identified "significant" operating and financial synergies, CF has determined that any deal would require a share-for-share exchange ratio that exceeds the levels discussed when the two companies first started negotiations and would have to give it a meaningfully higher ownership than 50 percent, the person said.

The talks, which lasted several weeks among top executives from both companies in the United States and Europe, were exclusively focused on the concept of a merger of equals while a takeover of one company by another was never considered, the person added, asking not to be named because the matter is not public.

CF, which announced the termination of discussions late on Thursday, did not disclose the reasons and declined to elaborate. Yara could not be immediately reached for comment.

The companies had not revealed any terms of a potential merger. The proposed deal would have seen CF Chief Executive Tony Will lead the combined company as chief executive with Yara's chairman of the board, Leif Teksum, to serve as chairman, the person familiar with the matter said.

The companies also worried that Norwegian government requirements would impair a merged company's ability to execute its business plan and deliver value for shareholders, the person added.

The Norwegian government, which owns a 36.2 percent stake in Yara, said in June it would not cut its stake below 34 percent and any change in that stance would likely require approval in parliament, which could be an uphill battle as the government rules in a minority and relies on opposition parties to push through its agenda.

A successful deal would have given Yara, the world's biggest nitrate fertilizer maker, major production units in the United States, where costs are lower due to cheap gas. CF would have gained a global footprint through Yara's presence in 150 countries with production assets and a well established distribution network.

Yara last week fired Chief Executive Joergen Ole Haslestad saying he was unsuitable to lead the merger talks.

Shares of CF, which closed at $253.85 on the New York Stock Exchange on Thursday, fell about 4 percent in after market trading following the announcement, giving it a market capitalization of $12.12 billion, according to Thomson Reuters data.

Yara shares ended Thursday trading at NOK 293.50 for a market capitalization of $12.40 billion, according to Thomson Reuters data.

The two companies fought a bitter battle in 2010 over control of U.S. rival Terra Industries, won by CF with a $4.7 billion offer. That deal also put Yara and CF into a 50/50 joint venture operating the GrowHow production units in Britain.

Global fertilizer margins have been under pressure, mainly due to Chinese overproduction, and the International Fertilizer Industry Association expects global production growth to well outpace demand at least through 2018.

Morgan Stanley and Goldman Sachs advised CF on the merger talks, while Yara was advised by Citi and Norwegian brokerage ABG Sundal Collier.

(Reporting by Soyoung Kim in Seoul and Kanika Sikka in Bangalore; editing by Alan Crosby and G Crosse)