Democrats call for regulator scrutiny on Koch's $3.6 billion fertilizer plant buy
Iowa Statehouse Democrats have some questions about a Koch Industries subsidiary's multi-billion-dollar acquisition of a Lee County fertilizer plant.
OCI Global announced the $3.6 billion sale in December. As the deal awaits regulatory approval, Rep. J.D. Scholten, D-Sioux City, and the rest of his caucus are asking regulators to investigate the impact consolidation could have on fertilizer prices.
“When you go out and ask any farmer, they’re being squeezed on the input side and the market side. Ask any row crop farmer and fertilizer is one of the number one costs they’ll bring up as an issue,” Scholten said. “We are exploiting our farmers having to pay record costs when it comes to fertilizer.”
Buyer Koch Ag & Energy Solutions already owns one fertilizer plant in Fort Dodge.
Rep. Megan Srinivas, D-Des Moines, said Iowans helped finance the more than $500 million in local, state and federal incentives to bring the plant back in 2017. She said, Iowans deserve answers about the future of the plant and its 260 employees.
“And another key factor in that is also trying to ensure that Iowans' jobs remain here especially since they were incentivized to build here for that purpose as well,” Srinivas said.
Details on OCI's $7.2 billion fertilizer cashout
Koch Ag & Energy Solutions announced the $3.5 billion acquisition of a Lee County fertilizer plant last year. The Iowa Fertilizer Company is currently operated by Dutch chemical company OCI Global.
As part of the cash deal, OCI Global is selling all of its interests in the plant to Witchita, Kansas-based Koch Ag & Energy Solutions. Koch is owned by Koch Industries, a privately held company run by chairman and CEO Charles Koch that’s valued by Bloomberg at $125 billion.
The cash deal is a weighty knock against the $2.9 billion in debt OCI Global described in its 2022 annual report. The deal’s announcement in December caused OCI’s stock valuation to jump 36%. Its stock value sits at $29.98 as of this February.
“Today’s announcement marks an evolutionary step in our journey to create value for shareholders, and to enhance our focus on efforts in lower carbon initiatives,” OCI Executive Chairman Nassef Sawiris said in a release.
The Iowa Fertilizer deal came just days after OCI Global announced the $3.62 billion sale of its 50% stake in another fertilizer manufacturer, Fertiglobe, to Abu Dhabi National Oil Company. Both the Fertiglobe and Iowa Fertilizer deals are subject to regulatory and anti-trust approval. But if successful, they would realize $7.2 billion in tax-free gross cash.
“The resultant financial profile provides significant flexibility to achieve all OCI’s goals, including to explore future value accretive growth opportunities and to afford the ability to meaningfully return capital to shareholders,” OCI’s CFO Hassan Badrawi said in a release.
The Iowa Fertilizer plant covers 320 acres in Wever and employs 260 people. The factory opened its doors in 2017 and claims to be able to produce 3.5 million metric tons of nitrogen fertilizers and diesel exhaust fluid annually.
House Democrats' questions
House Democrats’ letter asks regulators to take a closer look at the impacts of the deal. It's addressed to the Federal Trade Commission, the U.S. Department of Justice’s Antitrust Division and Iowa’s own Attorney General Brenna Bird, all of whom potentially could throw a stick in the deal's spokes.
They're asking regulators to look into the following:
- What does Koch plan to do with OCI-Iowa Fertilizer Co.’s existing operations in Iowa?
- How many current OCI-Iowa Fertilizer Co. workers does Koch plan to retain, both in the short-term and long-term? How many would be reassigned? How many jobs would be displaced by existing Koch employees?
- How many workers, if any, does Koch plan to lay off if its acquisition is successful?
- What commitments can Koch make about future operations in Weaver, Iowa?
- What outreach did Koch conduct to stakeholders, including workers, state or local officials or agencies, and other Iowa entities, prior to announcing its acquisition attempt?
- What impact, if any, does Koch anticipate the proposed OCI-Iowa Fertilizer Co. acquisition will have on nitrogen-based fertilizer costs for end users such as farmers in the short term and the long term?
- What is Koch’s understanding of the transferability of OCI-Iowa Fertilizer Co.’s existing Payment in Lieu of Taxes (PILOT) agreement with Lee County in the event of acquisition?
- If the agreement cannot be automatically transferred to Koch in the event of an acquisition, what plans, if any, does Koch have to ask for these or similar tax incentives to be applied to itself?
- In the event of a successful acquisition, what plans, if any, does Koch have to pay back taxpayers for local, state, and federal tax incentives previously offered?