Groups Oppose Fertilizer Plant Deal

LINCOLN, Neb. (DTN) -- Agriculture and environmental groups have asked the federal government to investigate Koch Industries' planned $3.6 billion acquisition of OCI Global's Iowa Fertilizer Company, expressing concern the transaction would further concentrate the fertilizer industry.

Koch announced the planned acquisition in December, saying in a news release it would have 100% ownership of the facility located along the Mississippi River in southeast Iowa in the town of Wever.

The plant opened in 2017 and has the capacity to produce 3.5 million metric tons of nitrogen fertilizers and diesel exhaust fluid annually.

Though fertilizer prices have come down in the past year, agriculture groups have called for expanded domestic production to help alleviate supply issues.

"IFCO was built with substantial local, state and federal investment, with its proponents citing the opportunity to challenge Koch Industries' dominance in fertilizer markets," the ag and environmental groups said in a letter to the Federal Trade Commission and the Department of Justice.

"Should the acquisition be allowed to proceed, taxpayers will have effectively subsidized the expansion of Koch's control over a critical and heavily concentrated sector of our agricultural economy. The IFCO plant currently employs more than 250 workers and produces approximately 2 million tons of fertilizer annually."

Signing the letter were R-CALF USA, National Farmers Union, 20/20 Vision, American Economic Liberties Project, American Grassfed Association, Campaign for Family Farms and the Environment, Family Farm Defenders, Farm Action, Farm and Ranch Freedom Alliance, Food and Water Watch, Iowa Citizens for Community Improvement, Institute for Agriculture and Trade Policy, Institute for Local Self-Reliance, National Family Farm Coalition, Open Markets Institute, Revolving Door Project, Sooner Food Group and Union of Concerned Scientists.

The groups said when the plant was proposed in 2012, it was "anticipated to decrease fertilizer costs" for farmers by "introducing competition into the highly consolidated" fertilizer industry.

"The promise of jobs and a stable, domestic source for nitrogen enabled the plant to garner the largest tax incentive package in Iowa's history: $133 million in local giveaways, another $112 million in state giveaways, and an estimated $300 million in federal tax giveaways," the letter said.

"The unrestricted federal funds left the door open for Koch Industries to purchase the company just six years after the plant opened."

The groups pointed to recently updated merger guidelines from the FTC and DOJ that, among other things, said mergers "raise a presumption of illegality" when they increase concentration in industries that already are concentrated.

"Fertilizer is one of the most highly consolidated sectors in American agriculture, with the top four firms collectively controlling 75% of fertilizer markets," the letter said.

"Koch Industries is in fact one of these four fertilizer firms, in addition to being one of the largest privately held companies in the country. While we would harbor grave concerns about any acquisition that further consolidates an agricultural sector as concentrated and as critical as fertilizer, those concerns are much more serious given this deal involves hundreds of millions in taxpayer dollars."

OCI said back in December that it launched a strategic review in March 2023, intending to close the discount to OCI's "intrinsic value and unlock value for its shareholders," according to an OCI news release.

The transaction is expected to result in a reduction in holding company net debt and deliver a capital return to shareholders, according to the OCI release. The deal will also enable OCI to explore other new opportunities in the energy transition space, building on OCI's lower-carbon ammonia and green methanol platforms.

The Iowa Fertilizer Company was the first world-scale greenfield nitrogen fertilizer facility built in the United States in more than 25 years.

IFCO is a wholly owned, indirect subsidiary of OCI. OCI brought IFCO to the market in early 2023 as a greenfield project. The facility was one of the largest private-sector construction projects in Iowa's history.

Read more on DTN:

"OCI Sells Wever Nitrogen Plant to Koch," https://www.dtnpf.com/…

"New Iowa Nitrogen Plant Opens," https://www.dtnpf.com/…

Todd Neeley can be reached at todd.neeley@dtn.com

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