IQ said the move is consistent with its strategy to build its presence and create value across the downstream sector. QP bought the 25% stake in Qafco from Yara in March, also for $1 billion.

“This transaction specifically enhances the shareholder value by transforming IQ into a 100% owner of the world’s largest single-site urea producer and expanding its footprints in a well-established fertilizer business,” said IQ.

As part of the transaction, Qafco has entered into a new gas sale and purchase agreement with QP, with effect from Aug. 1, 2020 until Dec. 31, 2035, covering the gas requirements of Qafco trains 1-6 and QMC. 

In addition, and as part of the same deal, IQ’s board of directors has approved Qafco’s acquisition of QP’s 40% stake in QMC, effective Jul. 1.

Located in Mesaieed, Qafco produces about 3.8 million t/y ammonia, of which approximately 80% is used as feedstock for urea production with the rest exported to India, Asia, North America and South America.

The company also produces about 5.8 million t/y of urea, which it exports to more than 20 countries around the world.

IQ noted that some of Qafco’s facilities are dated, specifically trains 1 and 2 and may require higher capital expenditures to maintain and operate in the future. It added that no major spending on maintenance or expansions has been made since 2013.

In addition, IQ said Qafco is subject to intense global competition as it produces basic commodities and is thus exposed to price fluctuations, and regional competition is likely to increase as local players seek to enhance operational efficiency and reposition their business.

An extraordinary general assembly to obtain shareholder approval for the transaction will take place on Sep. 13.

Author: Elaine Burridge, Freelance Journalist