US CF considers establishing master limited partnership

04 December 2013 23:07 Source:ICIS News

HOUSTON (ICIS)--US-based fertilizer producer CF Industries announced on Wednesday that it is in talks with financial advisors to evaluate options for establishing a master limited partnership.

In a filing with the Securities and Exchange Commission (SEC), CF said it was reviewing master limited partnership and MLP-like structures as well as other options. Company executives said if it was able to use such a structure, it possibly could start returning more cash to shareholders.

CF spokesperson Susan Fisher said the company is having discussions with two separate investment banks to weigh whether or not to shift to that type of structure. It is not expected that the producer will make a decision on whether to pursue this option until sometime in 2014.

“The company has not made any determination on whether to utilise any partnership structure but is in the process of conducting a rigorous analysis of the available options. The company will provide updates of the status of the analysis when appropriate,” said Fisher.

MLPs are designed to pay cash to holders while shielding the partnership from corporate taxes. Most MLPs are energy related as the US tax code limits the structure mainly to natural-resources business.

CF has been under pressure from activist hedge fund Third Point, which has been calling for CF to raise its payout to shareholders. In October the producer increased its dividend by 150% when its board of directors had approved a quarterly dividend of $1 per share up from the most recent payout of 40 cents.

Third Point acquired a 1.5% stake in the producer in July and immediately began seeking an increased dividend based on its outlook that CF had an advantage over its global competitors due to the company’s access to low cost natural gas in North America.

By Mark Milam