Proposed fertiliser mega merger creates a stink

Oslo: Yara International and CF Industries of the US have called off their $27 billion (Dh99.1 billion) merger talks, leaving the Norwegian company’s reputation in tatters after it lost its two leaders over the deal.

Questions will be raised over the conduct of Yara’s board following its decision to fire its chief executive, shortly after losing his proposed replacement, all over a tie-up that has failed to materialise. CF said early on Friday that despite identifying significant cost savings the two fertiliser companies were not able to propose a deal to the satisfaction of “all our respective shareholders”.

That hinted at a problem in the stance of the main shareholder in Yara, the Norwegian government, which holds a 36 per cent stake. The government is unable to reduce its stake to below 34 per cent without parliamentary support, which the centre-right minority coalition does not necessarily have on ownership questions.

Reports suggested that its desire to maintain its stake and keep the headquarters in Norway, combined with CF’s belief that it should have a bigger share of the merger due to its higher revenues, led to the deal’s collapse. Leif Teksum, Yara’s chairman, played down fears about the Norwegian government’s stance to the Financial Times last week, saying that he could convince politicians if the deal was compelling enough.

Yara last week ousted Joergen Ole Haslestad as chief executive after determining that the manager, due to retire early next year, was not the right person to lead the merger discussions. That followed the decision 10 days earlier of Svein Richard Brandtzaeg, who was due to replace Haslestad in the new year, to withdraw his candidature, blaming in part his lack of knowledge of the merger talks. Brandtzaeg will remain chief executive of Hydro, the Norwegian aluminium company.

Merger advisers not involved in the deal had already been critical of Yara’s conduct. “It looks a complete mess. To lose one chief executive may look unfortunate but to lose two is careless and reflects poorly on the board,” said one London-based adviser.

The deal would have created the world’s largest producer of nitrogen, a crucial crop nutrient, with a combined market capitalisation of $27 billion and joint sales last year of $20 billion.

Norwegian commentators had already compared the goings on at Yara — whose former chief executive Thorleif Enger is facing bribery charges that he denies — as a soap opera. Teksum said last week: “I can see that from the outside it looks a bit chaotic, but I still believe that it’s not as chaotic inside as it may appear from the outside.”

— Financial Times