Qatar Petroleum acquires Yara’s 25% stake in QAFCO for US$1 billion

QATARQatar Petroleum (QP) has signed an agreement with Yara international to acquire its 25 percent stake in Qatar Fertiliser Company (QAFCO) for $1 billion, a joint QP, Yara statement has revealed.

The transaction will mark a end of a partnership that started with the establishment of  QAFCO, a joint venture, in which Yara owned a 25% share with the remaining 75% owned by Industries Qatar (IQ).

QAFCO since then has become the world’s largest single-site urea producer, representing a significant percentage of the world’s traded urea volume, according to a QP statement.

Like its larger rival SABIC, Industries Qatar uses its discounted access to gas to make petrochemicals cheaper than rivals from outside the region.

However, in February this year the firm reported full-year earnings that fell short of analysts’ expectations.

Net income was US$2bn compared with $1.40bn a year earlier, the company said in a statement to the Doha bourse.

However, Global Investment House KSCC forecast a profit of $2.60bn, while EFG-Hermes Holding SAE put it at $2.30bn.

The coming months aren’t set to get any easier for Industries Qatar, which is majority-owned by Qatar Petroleum.

The chemical maker will face lower demand for its products as the first simultaneous recession for six decades in the US, Japan and Germany weakens demand for packaging and car bumpers.

IQ  is owned 51% by QP and is one of the region’s largest listed industrial groups with interests in the production, distribution and sale of a wide range of petrochemical, fertiliser and steel products, and in the provision of facilities management services.

IQ currently has one subsidiary (Qatar Steel Company QSC) and four joint ventures (Qatar Petrochemical Company Limited QSC, Qatar Fertiliser Company QSCC, Qatar Fuel Additives Company Limited QSCC and Fereej Real Estate Company QSC) and employs over 5,400 people.

The deal is still pending necessary local regulatory approvals and customary closing conditions.

Yara, said it will evaluate potential extraordinary dividends and/or share buy-backs, in line with its policy of maintaining a mid- to long-term net debt/EBITDA range of 1.5-2.0, after the closing of the transaction.

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