BASF said to be close to selling most fertilizer assets to Yara of Norway

Date:09-08-2011

BASF, the world’s largest chemicals company, is poised to sell most of its nitrogen fertilizer assets to Yara International ASA (YAR), two people with knowledge of the situation said.

Talks are advancing and an initial agreement may be reached by the end of September, said one of the people, who declined to be named because the sale process is private. While Yara is the front runner, Orascom Construction Industries (OCIC) of Egypt is also a suitor, the people said.

The sale includes a nitrogen site in Antwerp, Belgium, and a share of a venture in France. The assets generate about 500 million euros ($702 million) in annual sales. BASF, based in Ludwigshafen, Germany, put the bulk of its fertilizer assets up for sale in February as it shifts its focus to less cyclical products. The assets for sale are profitable, BASF has said.

BASF spokesman Michael Grabicki said the company doesn’t comment on speculation, as did Yara spokesman Esben Tuman. The Oslo, Norway-based company has said that it submitted a bid.

The fertilizer industry is consolidating as rising food prices spur farmers to plant more crops, boosting demand for soil nutrients. Yara’s fertilizer deliveries were up 4 percent in the second quarter, led by urea sales. Margins improved for all its main product groups, with the strongest increase for NPK, or nitrogen, phosphorus and potassium, and nitrates.

K+S Impact

The sale will have a knock-on effect on K+S AG, which has a marketing agreement with BASF for nitrogen fertilizer extending through 2014. All options for the distribution arm are being considered, Michael Wudonig, a spokesman for K+S, said by phone.

"We’re on the sidelines, waiting for the outcome of the BASF process,” Wudonig said.

BASF will retain fertilizer assets at its headquarters in Ludwigshafen, Germany.

Yara is also competing for the remaining stake of Burrup Fertilisers Pty, an Australian ammonia producer under receivership. The company, which owns 35 percent of Burrup’s parent, Burrup Holdings Ltd., wants to take full ownership.

For Orascom, the assets would be a chance to build on its acquisition of similar fertilizer assets from Royal DSM NV last year.