This is the third deal in a week in the highly fragmented global fertilizer industry, which is trying to cope with weak prices caused by excess supply.
CHS will have the right to buy as much as 1.7 million tons UAN - a solution of urea and ammonium nitrate in water - and urea, at market prices annually, the companies said on Wednesday.
The deal accounts for about 8.9 percent of CF’s total production capacity and will be effective for 80 years.
CF said last Thursday it would buy Netherlands-based rival OCI NV’s (OCI.AS) North American and European plants for $6 billion, while CVR Partners LP (UAN.N) said on Monday it would buy Rentech Nitrogen Partners LP RNF.N for $533 million.
CHS, an agribusiness owned by farmers, ranchers and cooperatives across the United States, will be entitled to semi-annual profit distributions from the unit, CF Industries Nitrogen LLC, the companies said.
CF Nitrogen currently owns production plants in Louisiana, Iowa and Mississippi. CF plans to drop down a fourth plant, located in Oklahoma, into CF Nitrogen before the deal closes, expected by Feb. 1.
CHS said on Wednesday it would not go ahead with the construction of a fertilizer plant at Spiritwood in North Dakota.
The $3 billion project, announced in 2014, was expected to produce more than 2,400 tons of ammonia daily when completed in the first half of 2018.
CHS, a big customer for CF, said the deal does not include additional capacity CF will get from the OCI acquisition.
Morgan Stanley & Co LLC and Goldman Sachs & Co are CF’s financial advisers, while Skadden, Arps, Slate, Meagher & Flom LLP is its legal adviser.
Baker & McKenzie LLP is the legal adviser to CHS.
While CF shares were down less than 1 percent at $56.85 before the bell, CHS shares were unchanged.
Up to Tuesday’s close, CHS stock had declined 3.6 percent over the past 12 months, while CF shares had fallen 16 percent.
Reporting By Shubhankar Chakravorty in Bengaluru; Editing by Sriraj Kalluvila