Koch Industries buys Iowa Fertilizer Co. for $3.6B

Koch Industries will pay $3.6 billion to buy the Iowa Fertilizer Co., one of the world’s largest modern fertilizer companies, amid surging profits for the industry.

OCI Global, the parent company for the plant located in Southeast Iowa’s Wever, announced the sale Monday to Koch Ag & Energy Solutions, saying the transaction will reduce debt for OCI, make money for shareholders and allow future investment for the multinational firm. The sale is pending U.S. antitrust approval.

“We are incredibly proud of IFCO’s extraordinary achievements since commissioning in April 2017 and want to thank all the OCI and IFCO employees who have contributed to this remarkable success,” OCI Chief Executive Officer Ahmed El Hoshy said in a statement. “We are exceptionally proud to have single-handedly built a world-class global nitrogen facility and revitalized a core industry in the United States.”

When the plant opened, many Iowans were skeptical of the more than $230 million in state and local incentives offered to make the deal.

  Buy Photo

OCI has met all state obligations by building a $3 billion fertilizer plant that employs 265 people full time and contracts with another 50 to 90 for engineering, electrical and service functions, Plant Director Mickey McHale told The Gazette last year.

The state paid the company $107 million over two years, while Lee County offered $133 million in local tax abatement over 20 years.

The Iowa Fertilizer Co. agreed to make predetermined payments to Lee County instead of paying property taxes and also pays a replacement tax on natural gas used at the plant, Dennis Fraise, president and CEO of Lee County Economic Development, told The Gazette.

OCI reported $9.7 billion in revenue across is global operations in 2022, up 54 percent from $6.3 billion in 2021 and 168 percent since 2020. The strong financial performance “enabled us to return capital to shareholders for the first time in over a decade,” according to the company’s 2022 annual report.

OCI’s revenue grew by more than 80 percent between 2020 and 2021. As its revenue skyrocketed, American farmers were paying high prices for fertilizer because of supply shortages nationwide brought on by the COVID-19 pandemic. An Iowa State University study found fertilizer prices in early 2022 were two to four times higher than in September 2020.

OCI Global, which changed its name from Orascom in 2013, started out as a family-owned construction company in Egypt, according to its website. The company bought its first fertilizer plant in 2005 and now has plants in the United States, the Netherlands, United Arab Emirates, Egypt and Algeria.

When Iowa signed a deal with Orascom in 2012 to build the Wever plant, farm groups predicted having a large supplier in state would reduce fertilizer costs for Iowa farmers.

The Iowa Fertilizer Co. combines nitrogen from the air with hydrogen from natural gas at high pressure and temperature to produce ammonia, which binds the nitrogen to make fertilizer. When the plant opened, owners said they planned to produce up to 2 million metric tons of fertilizer a year.

  Buy Photo

The company’s total fertilizer output in 2021 included 1.2 million tons of urea ammonium nitrate and 700,000 tons of anhydrous ammonia, McHale told The Gazette last year. Most of that fertilizer is sold in the Midwest.

The plant also made 700,000 tons of diesel exhaust fluid, or DEF, which is added to diesel gas to reduce greenhouse gas emissions.

Iowa, the nation’s No. 1 corn-producing state, has about 30 fertilizer manufacturing plants.

Koch Ag & Energy, part of Koch Industries, is a holding company for Koch Fertilizer and several other subsidiaries. Koch Fertilizer already has eight production and trade sites in Iowa.

Koch Industries, based in Wichita, Kan., is one of the largest privately-owned company in the world. It was founded by Fred Koch, father of brothers Charles and David Koch, who funded the right-leaning political group Americans for Prosperity.

Comments: (319) 339-3157; erin.jordan@thegazette.com