It’s a busy time for mergers and acquisitions in the global ag industry: Dow and DuPont, Syngenta and ChemChina, Bayer and Monsanto. Three deals, worth about a quarter trillion dollars.
None of those companies makes ammonia in the US any more, so the nitrogen production industry had only one active transaction underway: the merger between PotashCorp and Agrium. Recently, CF Industries failed to merge with Yara, then OCI Nitrogen failed to merge with CF Industries, then OCI failed even to merge with its own subsidiary, OCI Partners LP. The only successful merger since I began publishing this site was between Rentech and CVR Partners, which closed in April 2016.
It seemed as if there weren’t any North American nitrogen assets worth buying or available for sale – except, now, Cornerstone Chemical.
It was announced this week that Cornerstone will be sold, by one private equity firm to another. HIG Capital purchased the plant from Cytec Industries back in 2011 and only recently completed a “$175 million investment in upgrades and infrastructure.” This was in addition to Incitec Pivot / Dyno Nobel’s $850 million Waggaman ammonia greenfield that started up in late 2016; the total site investment was $1,025 million.
Greg Zoglio, Cornerstone’s CEO, said, “This is a very exciting new chapter for our company … H.I.G. has been a highly value-added partner, helping us transform Cornerstone into a unique customer-driven platform with exciting growth opportunities ahead.”
Keval Patel, Managing Director at H.I.G. Capital, commented, “We have enjoyed working with the Cornerstone team to create a market-leading platform in intermediate chemicals. The Cornerstone team’s strategic vision and solid execution has resulted in an outstanding investment outcome and another success story for our growing chemicals practice. Cornerstone has a very bright future …”
The transaction is subject to customary closing conditions and is expected to close in August 2017.
HIG Capital press release: H.I.G. Capital Announces the Sale of Cornerstone Chemical Company, 07/20/2017
Cornerstone has perhaps been overlooked as an available-for-sale nitrogen asset because it is the only urea plant in North America that doesn’t make ammonia.
It used to do so though: urea production didn’t begin at the site until 1965, and the melamine plant wasn’t added until 1971, but the ammonia plant had been running since 1954. The site’s original owner, American Cyanamid, added more ammonia plants in 1965 and 1979, but they were all shuttered by 2001. Urea production and upgrading continued, however, turning Cornerstone into “the sole manufacturer of melamine in North America, a leading manufacturer of acrylonitrile in the U.S. and a top supplier of sulfuric acid in the Gulf region.”
Littlejohn & Co LLC, the new owner of Cornerstone, describes itself as a “private equity and special situations investor, focused on investing in companies through all economic cycles.”
The Firm has a long track record of successfully investing in … middle market companies, which it defines as businesses, with revenues typically between $100M and $800M. The companies we invest in are all facing the opportunities and challenges of significant change, and we partner with management to transform these businesses.
Littlejohn & Co LLC website, accessed 07/23/2017
In a market like today’s, with historically low nitrogen prices, it makes sense that the company being purchased is ‘short ammonia,’ meaning that it benefits from low ammonia prices as a buyer, unlike ammonia manufacturers who benefit from high prices.
Cornerstone will therefore be grateful for its ~25 year ammonia supply contract with Dyno Nobel’s new Waggaman plant, which prices its ammonia, delivered across the site by pipeline, “at slight discount to Tampa CFR spot.”
You can get more details from HIG Capital’s press release and in my Research Note for Waggaman, LA.