ST. PAUL, Minn. — In a joint press release last week, CF Industries Holdings, Inc. (CF) and CHS, Inc. announced CHS will make an equity investment in a newly created CF subsidiary, CF Industries Nitrogen, and enter into a supply agreement.

CHS, a large farmer-owned cooperative that trades on the NASDAQ stock exchange as CHSCP, will be entitled to purchase annually up to a total of 1.7 million tons of urea ammonium nitrate and urea from CF at market prices.

Also according to the announcement, CHS will purchase a minority equity interest in CF Industries Nitrogen LLC (CF Nitrogen) for $2.8 billion and be entitled to semiannual profit distributions from CF Nitrogen. CF Nitrogen owns three production facilities in Donaldsonville, La.; Port Neal, Iowa; and Yazoo City, Miss.

CF also expects to contribute its Woodward, Okla., plant to the LLC prior to the transaction closing. CF will continue to manage and operate all production facilities.

Once the capacity expansion projects are completed at Donaldsonville and Port Neal, CF will have total production of 18.9 million product tons. Of that total, CHS will have the right to buy up to 1.7 million tons, or 8.9 percent, of CF Industries’ total production capacity.

The transaction is expected to close Feb. 1, 2016, or earlier by mutual consent, subject to satisfaction of certain conditions. "This venture represents tremendous strategic value to both CF Industries and CHS," said Tony Will, president and CEO of CF. "In the past, we have entered into long-term relationships with industry leaders Mosaic and Orica, and this venture with CHS, an industry leader in agriculture, is the logical next step."

Will described CHS as a reliable partner that will take delivery of the fertilizer products at an attractive valuation. CHS President and CEO Carl Casale said the purchase of a minority ownership in CF Nitrogen is the largest single investment in CHS history. It "positions CHS and our owners for long-term dependable fertilizer supply," he added.

Although CHS is a co-op, it’s a profit-making company, said Annette Degnan, a spokeswoman for CHS. It’s a "very large, diverse company that no one’s ever heard of." The deal will "absolutely help farmers," she added. "It provides them with a long-term supply of nitrogen across our trade area."

She said it’s also good for farmers because they have a long-term investment in a U.S.-based fertilizer supply. The deal "allows CHS to do what it does best, which is fertilizer distribution."

Most of the business CHS does in this region is wholesale, Degnan added, although it has a handful of retail outlets here, including one in Shipman, Ill., and another in Hamilton, Mich. CHS sells fuel to local cooperatives, buys and processes grain, makes animal nutrition products and provides fertilizer import, storage and blending services.

CHS has a presence in Europe, South America and the Asia-Pacific region and owns the Cenex chain of gas stations. Cooperatives that have a stake in CHS through the cooperative organizational structure include Ceres Solutions and Superior Ag Resources, both based out of Indiana – and there are many others.