Mosaic Buys Vale Fertilizantes
US-based Mosaic has agreed to acquire the fertilizer business from Brazilian mining group Vale for $2.5 billion, making it the country’s leading producer and distributor of fertilizers. The deal had already been approved by Vale’s board on Oct. 27. Vale could earn an additional amount of up to $260 million in cash over the two years following completion of the acquisition, providing certain financial metrics are achieved.
“This acquisition provides Mosaic a tremendous opportunity to capitalize on the fast-growing Brazilian agricultural market and from improving business conditions. We see this as an ideal strategic fit for Mosaic,” said Mosaic’s president and CEO Joc O’Rourke.
Vale Fertilizantes has capacity to produce 4.8 million t/y of finished phosphate crop nutrients and 500,000 t/y of potash and owns five phosphate rock mines, four chemical and fertilizer production plants and one potash facility, all in Brazil. Mosaic will also gain Vale’s 40% interest in the Miski Mayo phosphate mine in Peru and a potash project in Kronau, Saskatchewan, Canada.
The US producer also has the option to acquire the potash project in Rio Colorado, Argentina, but this transaction is subject to Mosaic’s agreement following due diligence. The transaction excludes Vale’s nitrogen and non-integrated phosphate business in Cubatão, Brazil, which is required to be carved out of Vale Fertilizantes prior to completion.
Mosaic intends to fund the acquisition with $1.25 billion in cash, which it plans to raise through the issuance of debt and approximately 42.3 million shares of common stock. The acquisition is expected to be accretive to earnings in 2018 and generate more than $80 million of after-tax synergies.
"We expect this transaction to be both accretive to earnings and cash-flow positive, and we will continue our focus on maintaining a solid investment-grade credit rating. As commodity and crop nutrition markets improve, Mosaic will have the ability to meaningfully outperform our competition and generate shareholder value. Vale will be a valued minority shareholder and partner who will bring significant Brazilian expertise that we believe will benefit Mosaic in the years ahead,” commented Rich Mack, Mosaic’s executive vice president and chief financial officer.
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 as long as the company continues to meet certain ownership thresholds.
The transaction is expected to close in late 2017, subject to receiving regulatory approvals and the usual closing conditions, including the completed sale of the Cubatão assets. Approximately 8,000 employees will transfer to Mosaic, raising the company's global headcount to about 17,000.
Mosaic said it expects its US phosphate production facilities will continue to operate at high rates to meet strong and growing global demand. The producer added that Brazil is anticipated to remain a key market for its MicroEssentials premium products, which it will continue to produce exclusively in the US.
