Mosaic acquire Vale’s fertiliser business in $2.5 billion deal

Mosaic to acquire Vale’s fertiliser business in $2.5 billion deal

6:34 AM, 20th December 2016
Mosaic to acquire Vale’s fertiliser business for $2.5 billion

PLYMOUTH, US: The Mosaic Company declared that it has agreed to acquire fertiliser business of Vale SA, for a price valued at $2.5 billion. The deal is expected to close in late 2017. Vale’s fertiliser business, Vale Fertilizantes is a Brazilian fertiliser company.

Vale will have the potential to earn an additional amount of up to $260 million to be paid in cash over the two-year period following closing if certain financial metrics are achieved.

Upon closing of the transaction, Mosaic expects to become the leading fertiliser production and distribution company in Brazil, one of the world's preeminent agricultural markets.

Mosaic plans to fund the acquisition with $1.25 billion in cash, which the company aims to raise through the issuance of debt, and approximately 42.3 million shares of its common stock. The shares of Mosaic common stock to be issued to Vale at closing are expected to represent approximately 11 percent of Mosaic's outstanding shares.

The deal is expected to be accretive to Mosaic's earnings per share in 2018, generate over $80 million of after-tax synergies and provide substantial leverage to improvements in the crop nutrient business cycle.

The business to be acquired currently has the capacity to produce 4.8 million tonnes of finished phosphate crop nutrients and 500,000 tonnes of potash. It includes five Brazilian phosphate rock mines and four chemical and fertiliser production facilities, and one potash facility in Brazil.

Through the acquisition, Mosaic also will acquire Vale's 40 percent economic interest in the Miski Mayo phosphate mine in Peru, and its potash project at Kronau, Canada.

Mosaic has the option to include the Rio Colorado, Argentina potash project at closing as part of the transaction. The inclusion of the Rio Colorado potash project in the transaction is subject to Mosaic's agreement following appropriate diligence. The transaction excludes Vale's Cubatao-based nitrogen and non-integrated phosphate business, which is required to be carved out of Vale Fertilizantes prior to closing.

Mosaic's combined fertiliser business in Brazil will be led by Rick McLellan, currently Mosaic's senior vice president, commercial.

Following the closing, Vale will have the right to designate up to two individuals, one of whom must be independent, for nomination to Mosaic's board of directors as long as it continues to meet certain ownership thresholds. Subject to limited exceptions, the Mosaic shares to be issued to Vale may not be transferred for two years following the closing, after which time Vale will have customary registration rights.   In connection with its minority interest, Vale has agreed to certain standstill and lockup obligations, and to certain voting agreements.

The acquisition will add approximately 8,000 employees, bringing Mosaic's global headcount to approximately 17,000.

Mosaic expects that its US phosphate production facilities will continue to operate at high rates in order to meet strong and growing global demand. The company's premium MicroEssentials products are also expected to continue to be produced exclusively in the US and Brazil is expected to remain a key market for MicroEssentials.

“This acquisition provides Mosaic with a tremendous opportunity to capitalise on the fast-growing Brazilian agricultural market and from improving business conditions. We see this as an ideal strategic fit for Mosaic. We have proven expertise in phosphate mining and manufacturing, a strong record of successful acquisition integration, and extensive relationships and experience in Brazil,” said Joc O'Rourke, president and CEO.

“I am excited at the prospect of leading Mosaic's vastly expanding business in Brazil. This will be an ideal time for us to grow in the region, with the strong Brazilian farm economy and growers across the country working to deliver higher crop yields,” said McLellan.

J P Morgan Securities and UBS Investment Bank served as financial advisors to Mosaic, Simpson Thacher & Bartlett LLP and Lobo & de Rizzo Advogados acted as legal counsel.

© Worldofchemicals News



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