Wednesday, 3 February 2010

Could Poland fertilizer agreement signal a merger?

Zaklady Azotowe Pulawy (ZAP), Poland’s largest fertilizer producer, and Zaklady Chemiczne Police (ZChP), the country’s second-largest fertilizer producer, today signed a business cooperation agreement.

With the two groups in the midst of privatisation, I wonder if potential purchasers might look to merge the two groups, with all the consequent savings in overheads. ZAP produces nitrogen fertilizer, melamine and caprolactam, while ZChP produces nitrogen phosphorus potassium (NPK) fertilizer and titanium dioxide (TiO2) so there are obvious synergies in terms of prduct portfolio.

Any moves entailing job cuts or plant closures will attract fierce opposition in Poland, where social considerations have stymied previous attempts to rationalise outdated operations.

According to ICIS news, the agreement would initially address possible joint activities in optimising production processes, investing in and repairing fertilizer and ammonia units, and pushing ahead with environmental protection and energy initiatives, the companies said.

It replaced a previous cooperation agreement drawn up in 2008, which was abandoned because of the economic downturn.

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