The Mosaic Company on Oct. 28 announced that it has signed a definitive agreement to acquire the phosphate business of CF Industries Inc. for $1.2 billion in cash plus $200 million to fund CF’s asset retirement obligation escrow.
Under terms of the agreement, Mosaic would acquire the 22,000-acre South Pasture phosphate mine and beneficiation plant in Hardee County, Fla., a phosphate manufacturing facility in Plant City, Fla., and ammonia terminal and finished product warehouse facilities in Tampa. The CF facilities currently produce approximately 1.8 million mt of phosphate fertilizer per year, which would be additive to the annual 8.2 million mt currently produced by Mosaic.
The acquisition is expected to add approximately $0.30 per share to Mosaic’s 2015 earnings per share, excluding any debt financing costs and any changes to outstanding share count.
The proximity of CF’s South Pasture mine to Mosaic’s planned Ona phosphate mine in Hardee County would allow Mosaic to take advantage of the synergies associated with the combined mining assets. The existing infrastructure at South Pasture would result in Mosaic saving approximately $500 million by not having to construct a $1 billion beneficiation plant. Mosaic would instead invest approximately $500 million to develop phosphate rock reserves and improve existing mines.
Mosaic and CF also signed strategic supply agreements under which CF will provide Mosaic with up to approximately 1.0 million mt per year of ammonia. Under one agreement, Mosaic will purchase up to 725,000 mt annually for 15 years with pricing based on a formula tied to the prevailing price of U.S. natural gas. This agreement is expected to commence prior to January 2017. Under a second agreement, Mosaic will purchase approximately 270,000 mt annually for three years from CF’s Trinidad operations at CFR Tampa market-based pricing.
In light of these supply arrangements, Mosaic has decided to forego its proposed ammonia manufacturing plant at its Faustina, La., phosphate facility, saving approximately $1.1 billion in future capital expenditures.
“Uniting CF Industries’ phosphate operations with Mosaic’s creates an ideal combination that provides the opportunity for enhanced operating efficiencies and sustainability efforts, lower production costs and reduced capital investment–creating value for our shareholders, customers and employees,” said Mosaic President and CEO James T. Prokopanko. “The addition of these new phosphate assets and securing access to long-term ammonia supplies solidifies Mosaic’s position among the largest and best phosphate producers in the world.”
The phosphate acquisition would be additive to Mosaic’s existing Florida operations, and complements the company’s plans to mine phosphate rock reserves in Hardee and Desoto counties and extensions of the existing Wingate mine.
“We are thrilled to add CF Industries’ Florida phosphate employees and facilities to the Mosaic family,” said Gary N. "Bo" Davis, Mosaic senior vice president, Phosphate Operations. “We look forward to working together to help the world grow the food it needs while strengthening our operations and deep commitments to the Central Florida communities where our employees live and work.”
In total, the transactions are expected to favorably impact Mosaic’s future capital expenditures. In addition to the $1.4 billion total consideration in connection with the acquisition, Mosaic expects to spend an estimated $500 million to develop reserves and improve existing mines, and an estimated $200 million on marine assets to transport ammonia from Louisiana to its Florida facilities.
The estimated $2.1 billion of investments and capital expenditures is expected to be offset by an estimated $2.1 bill