US fertiliser manufacturer CF Industries has ditched plans for a $8bn (£5.5bn) merger with smaller Dutch rival OCI, which would have originally seen it set up a new holding company in the UK, following the US Treasury’s announcement of further measures to crackdown on so-called tax inversions
In April, the Treasury department and the Internal Revenue Service released new rules on such inversions, whereby US companies typically move their corporate headquarters to a country with a more favourable tax regime via a merger with a smaller firm. They are then able to repatriate foreign profits without paying US taxes.
Under a complex deal first agreed in August 2015, OCI’s European, North American and global distribution businesses would have become part of the new company. CF would then have set up its headquarters in the UK so as to reduce its corporate tax rate from 35% to 20%. Subsequently the plans were changed in favour of establishing the headquarters in the Netherlands.
In a joint statement with OCI, CF Industries said the US Treasury announcement on April ‘materially reduced the structural synergies of the combination’.
Tony Will, president and chief executive officer, CF Industries Holdings, said: ‘Although the original deal created significant value for both parties, changes in the regulatory and commercial environments forced us to re-evaluate the combination and led us to the conclusion that terminating the agreement is in the best interests of CF Industries and its shareholders.’
CF will pay OCI $150m in connection with the termination. If the deal had gone ahead it would have created the world’s largest nitrogen business.
The new tax inversion rules were also held to be the reason drug companies Pfizer and Allergan abandoned a $160bn merger last month that would have seen Pfizer relocate to Ireland for tax purposes.
