Norway's Yara says UK sale to CF Industries could boost dividend

OSLO, July 1 (Reuters) - Norway's Yara could increase its dividend after agreeing on Wednesday to sell its 50 percent stake in British fertiliser manufacturer GrowHow UK to joint venture partner CF Industries for a cash payment of $580 million.

The partners both bid for full control of GrowHow, which owns and operates nitrogen production facilities in Britain, under a so-called shoot-out process, with the higher bidder taking the asset.

"When the price reached this level it was so high that we rather would be sellers than buyers," Yara's Head (Other OTC: HEDYY - news) of Investor Relations Anders Lerstad told Reuters.

"If we don't find the right growth alternatives we'd be more than happy to pay out the money to the shareholders," he added.

"Over the last years we have paid out more (than the dividend policy dictated), and we would like to do that in the future as well".

Yara has a dividend policy of paying out between 40 and 45 percent of its net income. Last year it paid out 47 percent of net income.

In October last year, Yara and Illinois-based CF broke off merger talks after they failed to agree on terms of a deal that would have created a global fertilizer concern with an enterprise value approaching $30 billion..

Analysts had seen Yara as the most likely purchaser of the GrowHow UK stake.

"We are surprised that CF was willing to place a higher bid than Yara, given that Yara has larger synergies with GrowHow through its downstream network," Pareto Securities analyst, Jon David Gjertsen, said adding that he saw the sale as accretive to Yara.

Yara shares were up 0.6 percent at 0955 GMT broadly in line with Oslo's benchmark index. Yara trades at around 10.94 times forward earnings -- a discount to CF Industries' 13.42 times multiple, Thomson Reuters data showed. (Reporting by Stine Jacobsen, additional reporting by Ole Petter Skonnord; Editing by Keith Weir)