Dec. 19, 2012
SAO PAULO--Mining concern Vale SA plans to sell a nitrogen-based fertilizer plant in southern Brazil to state-owned energy giant Petroleo Brasileiro SA in an asset swap worth $234 million, the firms said Tuesday.
Located in Araucaria, Parana state, the plant has a capacity to produce annually 1.1 million metric tons of ammonia and urea from asphalt residue supplied by Petrobras's nearby Presidente Getulio Vargas refinery.
Petrobras plans to fully finance the acquisition using payments from Vale, which signed a 30-year contract earlier this year to lease a potash mine and mineral rights in the northeastern state of Sergipe from the oil company.
The transaction represents an effort by Brazil's biggest companies to streamline their fertilizer businesses--expected to benefit in coming years from booming agricultural production--at a time of investor skepticism.
Vale, the world's top producer of iron ore, has drastically scaled back its investment plans in recent months as uncertainty about economic growth and steel demand in China dealt a blow to prices for its main products. Petrobras's shares have lost some 45% of their value over the past three years amid production delays and government gasoline-price subsidies that weigh heavily on the company's balance sheet.
Vale said Tuesday that the plant in Araucaria "does not have synergies with the rest of our portfolio," and added that its sale should reduce annual investments in maintenance by $50 million.
Petrobras, on the other hand, said the plant "complements" its existing fertilizer assets and should allow for "close proximity to markets in Sao Paulo and Parana, greater storage capacity and means of transportation." The energy giant's board approved the acquisition in a meeting Tuesday.
The deal is pending approval from Brazil antitrust agency CADE.