Brazilian mining giant Vale S.A. announced on May 27 that it has concluded the acquisition, through its subsidiary Mineração Naque S.A., of a direct and indirect stake of 58.6 percent in the equity capital of Fertilizantes Fosfatados S.A. – Fosfertil (Fosfertil), and the Brazilian fertilizer assets of Bunge Participações e Investimentos S.A., for a total of US$4.7 billion.
Vale said it paid $3 billion for the Fosfertil stake, which corresponds to 72.6 percent of the common shares and 51.4 percent of the preferred shares, from Bunge Fertilizantes S.A., Bunge Brasil Holdings B.V., Yara Brasil Fertilizantes S.A. (Yara), Fertilizantes Heringer S.A. (Heringer), and Fertilizantes do Paraná Ltda. (Fertipar). The sum is equivalent to a price per share of US$12.0185.
The remaining US$1.7 billion was attributed to the acquisition of the Bunge fertilizer assets in Brazil, which include phosphate rock mines in Araxá (Minas Gerais) and Cajati (São Paulo) and processing plants in Cubatão and Guará (both in São Paulo), but do not include retail/distribution operations.
Pursuant to Brazilian corporate law and capital markets regulations, Vale said it will launch a mandatory offer – to be filed with CVM, the Brazilian Securities Commission, in the near-term – to buy the 0.19 percent of the common shares held by the minority shareholders of Fosfertil for US$12.0185 per share, the same price paid to the other common shareholders of Fosfertil.
As announced earlier this year, as part of the acquisition of Fosfertil, Vale holds an option contract with The Mosaic Company that gives it the option to acquire Mosaic’s direct and indirect stakes in Fosfertil, corresponding to 27.27 percent of the common shares and 16.65 percent of the preferred shares and to 20.27 percent of the equity capital of Fosfertil, for nearly US$1.030 billion, at a price per share of US$12.0185. Vale said the transaction with Mosaic is expected to be concluded in the near future. Vale plans to buy out the remaining 0.2 percent stake of Fosfertil held by minority shareholders in a tender offer that will be filed in coming weeks.
In addition to the acquisition of Mosaic’s Fosfertil shares, Vale reported earlier that it has also agreed to acquire from Mosaic a processing plant located in Cubatão in São Paulo for US$50 million. Vale said it has a nominal capacity to produce 300,000 mt/y of single superphosphate (SSP), which is the phosphate nutrient used most often in Brazil. Mosaic in February confirmed the transactions with Vale and said they will have no impact on Mosaic’s significant fertilizer blending and distribution business in the country and its SSP production and port activities in the Paranagua complex.
Vale said the recent acquisition is in line with its strategy to become a leading global player in the fertilizer business. “The build-up of a large world-class value creation platform is being pursued through a combination of acquisitions and organic growth,” the company said. “Given the quality of the assets being acquired and the strength of long-term market fundamentals, we expect this transaction to generate returns above our weighted average cost of capital, creating significant shareholder value.”
Yara confirmed on May 28 that it had sold its shares in Fosfertil and its 50 percent stake in the Anitapolis phosphate rock project to Vale. Yara reported in January that it had agreed with Vale to sell its shares in Fosfertil in Brazil, and that it would sell its stake in the Anitapolis phosphate rock project to Vale at the same time. Yara owned 15.5 percent of Fosfertil directly and indirectly following the acquisition of Fertibras in 2006. The Anitapolis project, a plan for developing a phosphate mine in Brazil, was acquired by Yara when it bought Adubos Trevo in 2000. The project is still at an early stage, but significant development work has been done.
The sale of the Fosfertil shares provides Yara a pretax gain of approximately US$550 million, while the sale of the Anitapolis stake generates an additional pretax gain of approximately US$20 million. The total cash effect after tax is expected to be around US$680 million, Yara said.
Bunge held a 42.3 percent interest in Fosfertil. The company confirmed in January that it had entered into a definitive agreement with Vale under which Vale would acquire Bunge’s fertilizer nutrients assets in Brazil, including its interest in Fosfertil, for $3.8 billion in cash. Net proceeds after taxes, transaction fees, and expenses will be approximately $3.5 billion, Bunge said.
“We’re pleased to have successfully concluded the sale of our Brazilian nutrients assets, allowing us to realize the significant value we built in this business over the years,” said Alberto Weisser, Bunge chairman and CEO. “Proceeds from the transaction provide us with the financial flexibility to redeploy capital for growth and improve our financial profile. In the near term, we’ll use approximately $1.5 billion to pay down a portion of our debt and will continue to focus on other opportunities to enhance shareholder value.”