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Mosaic buying Vale fertilizer assets
Dec. 20, 2016
The Mosaic Company
United StatesFollow
United States
Vale
BrazilFollow
BrazilVale SA agreed to sell part of its fertilizer business to Mosaic Co for $2.5 billion, in a move aimed at helping the world’s largest iron ore producer cut debt and focus on core mining activities.
Vale will receive $1.25 billion in cash and $1.25 billion in newly issued shares of U.S.-based Mosaic, a roughly 11 percent stake in the firm, the Rio de Janeiro-based company said in a Monday securities filing.
After the deal closes by late 2017, Vale will have the right to pick two members of Mosaic’s board, the filing said.
According to the filing, Vale will retain control of its nitrogen and phosphate fertilizer assets in the city of Cubatão, in southeast Brazil but expects to sell them in 2017. Sources with knowledge of the deal told Reuters in October that Vale was also in talks with Norway’s Yara International ASA to sell some of its fertilizer assets.
Mosaic will acquire the proposed potash project at Kronau, Sask. and the rest of Vale’s phosphate assets in Brazil as well as Vale’s stake in Peru’s Bayóvar mine. Mosaic has yet to decide whether to include the Rio Colorado potash project in Argentina in the acquisition.
Mosaic may pay an additional $260 million depending on future earnings of the fertilizer unit, the filing said. Vale will not be allowed to sell Mosaic shares for two years.
Analysts at Banco BTG Pactual estimate Mosaic is paying 8.6 times the fertilizer division’s earnings before interest, taxes, depreciation and amortization, a gauge of operational profit.
Vale, the world’s largest iron ore miner, is disposing of assets to help meet a $10 billion debt-reduction target by next year. The plan was devised by Chief Executive Murilo Ferreira to help protect the mining company against lower iron ore and nickel prices, after losing a record $12.1 billion last year.
Vale said it will use the funds raised with the sale to cut debt, while continuing its divestment program.
Source: Reuters
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