Quick Idea: OCI N.V. (OCI AS)
Value + Catalyst
OCI N.V. is a global producer and distributor of nitrogen (primarily fertilizers) and methanol products. In early 2023, activist investor Jeff Ubben (Inclusive Capital) urged OCI's management to consider strategic alternatives in order to close the discount to OCI's intrinsic value and unlock value for its shareholders. Following a subsequent strategic review, OCI announced two transformative transactions in December 2023:
MENA Fertilizer Business ("Fertiglobe"): Disposition of ~50% equity stake in publicly-traded Fertiglobe JV to state-owned Abu Dhabi National Oil Company ("ADNOC") for ~€3.3 bn; and
Iowa Fertilizer Company (“IFCO"): Sale of consolidated subsidiary, IFCO, to Koch Industries for ~€3.3bn
This trade opportunity arises from the material de-risking of OCI NV following the above announced transactions, which will leave the remaining company with ~80% of its share price in cash. Following the expected completion of these transactions during calendar year 2024, OCI should be left with €4.4bn in net cash (~€21/share) and a substantial remaining business that I conservatively value at ~€10 to ~€15/share, including a state-of-the-art “blue ammonia” plant in Texas with production expected to start in Q1 2025.
Based on this framework, I believe that at a current market price of €25-26/share, the risk reward is very attractive. Not only are you able to purchase OCI equity at ~80% of cash value, but both the additional clarity on the use of proceeds and the actual closing of the two transactions should serve as catalysts that can help close the discount between intrinsic fair value and market price and result in significant price appreciation.
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Company commented that both deals (IFCO and Fertiglobe) are on track to close before year-end ‘24. IFCO is the trickier one, but my diligence says it still has a good chance of closing (global commodity, etc.).
Hi, thanks for the article.
What about the announced deal for the blue ammonia plant?
You wrote you'd estimate the value of the remaining business (including ammonia) at 10-15€ per share. With blue ammonia gone for ~10€ per share, what would you estimate the remaining business’ worth?