CF Industries Holdings Inc., an Illinois-based fertilizer maker with a facility in Donaldsonville, and its Dutch rival OCI NV have called off today their planned $8 billion merger.
The Wall Street Journal reports the defunct merger is the latest multibillion dollar transaction impacted by changes to U.S. tax rules designed to restrict “inversion deals.”
The two companies said they were unable to develop a structure for the deal to combine CF with some of OCI’s operations that would create value for both sets of shareholders, citing a tougher regulatory and commercial environment in a joint statement on Monday.
“The Treasury announcement on April 4, 2016 materially reduced the structural synergies of the combination,” the companies said.
The U.S. Treasury last month announced another wave of administrative action against inversions, which had helped drive mergers-and-acquisitions activity to record highs as U.S. companies looked to foreign deal-making to lower their tax bill.
In an inversion deal, U.S. companies take a foreign address in a country with a more favorable tax regime, typically through merging with a smaller firm. It enabled them to repatriate foreign profits without paying U.S. taxes.
CF Industries and OCI initially planned to register the combined company in the U.K., lowering its overall tax rate to 20% from 34%. The companies subsequently agreed in December to move the tax residency to the Netherlands, where the corporate tax rate is 25%, to satisfy tougher inversion rules put in place last November by the Treasury.
A deal would have created a global nitrogen-fertilizer giant. CF is one of the world’s largest manufacturers and distributors of nitrogen fertilizers used for agricultural purposes, while OCI—which operates in Egypt, Algeria, the Netherlands and the U.S.—makes natural-gas-based fertilizers and industrial chemicals.
CF Industries will pay OCI a $150 million breakup fee.
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