CF Industries Pulls $8 Billion Takeover of OCI Assets

Fertilizer maker CF Industries (CF) - Get Report pulled its $8 billion acquisition of the European and North American operations of OCI, adding its deal to a growing list of transactions killed off by a government crack down on so-called tax inversions.

CF Industries shares are likely to come under pressure following the deal's collapse, which ends its plan to become the world's largest, listed supplier of nitrogen fertilizer. CF Industries climbed almost 8% when it announced the takeover on Aug. 12 last year.

"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 was in the best interests of CF Industries and its shareholders," president and CEO Tony Will said in a statement on Monday.

Deerfield, Il.-based CF Industries planned to relocate its registered office to the U.K. by becoming a subsidiary of a newly registered business that would also house the European, North American and distribution businesses of Netherlands' OCI. The deal, announced in August last year, was expected to generate about $500 million in savings.

The Obama administration has cracked down on U.S. companies using acquisitions to move registered offices to countries with lower tax rates and to avoid repatriating cash in foreign subsidiaries. In April, the Treasury department and the Internal Revenue Service announced the latest in a series of new regulations that also barred so-called earnings stripping, where companies use internal loans to effectively move U.S. earnings overseas.

The regulatory changes have claimed more than $200 billion of deals, including Pfizer's (PFE) - Get Report $160 billion merger with Allergan (AGN) - Get Report , which folded within 24 hours of the April rules coming into force. Earlier changes to inversion rules also did for another pharmaceuticals deal, prompting AbbVie's (ABBV) - Get Report decision to cancel its $54 billion takeover of Ireland's Shire (SHPG) - Get Report in 2014.

CF Industries said that it had sought an alternative structure with OCI that would enable it to save the takeover, but failed to come up with anything suitable. CF Industries had planned to swap a 25.6% stake in the combined group, and pay $700 million in cash or stock for its European rival's operations. The new entity would also have assumed about $2 billion of OCI debt.

The decision to pull the takeover marks a second setback for CF Industries after merger talks with Oslo-listed Yara International were abandoned in 2014 after the parties failed to agree terms.

CF Industries will pay a $150 million break fee to OCI.

CF Industries shares closed Friday at $28.59. OCI shares traded Monday at euro 12.98 ($14.54), down  euro 0.57, or 4.2% on their Friday close.