Brazilian mining giant Vale to sell part of fertilizer business to Mosaic Co for $2.5 bn
20 December 2016
Brazilian mining giant Vale SA, yesterday struck a deal to sell part of its fertilizer business to US fertilizer company Mosaic Co for $2.5 billion in order to seduce debt.
The deal will be Mosaic's biggest acquisition, and will further cement its position as the world's largest producer of phosphate crop nutrients.
Under the terms of the deal, Mosaic will buy Vale's phosphate assets in Brazil, Vale's stake in Peru's Bayóvar mine and Canada's Kronau potash project, and Mosaic has the option to include the Rio Colorado, Argentina potash project at closing as part of the transaction.
Mosaic will pay $1.25 billion in cash and $1.25 billion in newly-issued shares. Mosaic may pay an additional $260 million depending on future earnings of the acquired business.
The deal will give Vale around 11 per cent stake in the Minnesota-based company and two board seats, but cannot sell the stake for two years from closing of transaction.
The business to be acquired currently has 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 fertilizer production facilities, as well as one potash facility in Brazil. Mosaic also will acquire Vale's 40-per cent stake in the Miski Mayo phosphate mine in Peru, and its potash project at Kronau, Saskatchewan, Canada.
The inclusion of the Rio Colorado potash project in the transaction is subject to Mosaic's agreement following due diligence.
The transaction excludes Vale's Cubatão-based nitrogen and non-integrated phosphate business, which is required to be carved out of Vale Fertilizantes prior to closing.
"This acquisition provides Mosaic a tremendous opportunity to capitalize on the fast-growing Brazilian agricultural market and from improving business conditions," said Mosaic's president and CEO Joc O'Rourke.
"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," he added.
Rio de Janeiro-based Vale expects to use the proceeds from the sale to reduce its massive debt of $26 billion.
The company is in talks to sell other non-core assets, and recently finalised a deal to sell future gold output to Silver Wheaton Corp for an upfront payment of $800-million.
It is also reportedly in talks to sell some of its fertilizer assets to Norway's Yara International.