US phosphate and specialty fertilizer producer Itafos Inc. on March 13 announced that its Board of Directors has commenced a process to explore and evaluate various strategic alternatives that may be available to Itafos in an effort to enhance shareholder value.
The Board has formed a Committee of Independent Directors to oversee the process. The Committee, working together with its advisors and the management team, will consider a wide range of potentially value-enhancing alternatives, including, among other things, the sale of the company, a merger with another strategic partner, and a recapitalization or continued execution of the company’s long-term business plan.
CL Fertilizers Holding LLC (CLF), the company’s largest shareholder, supports the review process. CLF is an entity owned by funds managed by Castlelake LP.
“Itafos continues to successfully execute on its long-term plan,” said Itafos Chairman Anthony Cina. “Over the last year, Itafos has taken decisive actions to strengthen the company, including by working to extend the life of the Conda mine, extending the maturity and reducing the cost of the company’s debt, improving its capital structure through significant deleveraging, and strengthening the company’s management and Board. We expect significant shareholder benefits from these initiatives and believe now is an opportune time to consider the full range of potential strategic alternatives to enhance value for all Itafos shareholders.”
The news comes after two years of record earnings for Itafos, which has benefited from a global surge in fertilizer prices. While the company has not yet released full-year and fourth-quarter 2022 results, guidance that was reaffirmed in November 2022 (GM Nov. 18, 2022) was for full-year adjusted EBITDA of $210-$230 million and fourth-quarter at $35-$55 million. Full-year 2021 adjusted EBITDA was $143.4 million, up from 2020’s $15 million.
In a deal closing in January 2018, Itafos agreed to pay $100 million for its major asset, the Conda Phosphate Operations in Idaho, from Agrium Inc., a wholly-owned subsidiary of Nutrien Ltd. The sale was required by the US Federal Trade Commission as a condition for its approval of the merger of Agrium and Potash Corp. of Saskatchewan (GM Jan. 19, 2018). As part of the deal, Agrium and Itafos entered into long-term supply and offtake agreements, with Agrium supplying Conda with 100% of its ammonia requirements and agreeing to purchase 100% of the MAP produced, with pricing formulas based on major phosphate benchmarks.
Itafos also has a long-standing partnership with MacroSource (formerly Gavilon) to supply the distributor with phos acid from Conda (GM Dec. 6, 2019).
Itafos puts Conda’s phosphate production capacity at 550,000 mt/y, which includes MAP, MAP with micronutrients, superphosphoric acid, merchant-grade phosphoric acid, and ammonium polysulfate. Approximate MAP capacity has been put at 340,000 /mt/y, with 170,000 mt/y for the other phosphate products. The company also has hydrofluorosilicic acid capacity of approximately 27,000 mt/y (GM July 1, 2022).
In addition to Conda, Itafos owns the Arraias Phosphate Operations in Tocantins, Brazil, which has the capacity to produce 500,000 mt/y of SSP and SSP with micronutrients. It has gross sulfuric acid capacity of 220,000 mt/y. While the company is not currently producing SSP at the site, sulfuric acid production came back online in 2022 (GM Feb. 11, 2022).
Itafos’s development portfolio includes additional projects in Brazil, including the Santana Project, a phosphate mine and fertilizer project located in Pará State, and the Araxá Project, a rare earth elements and niobium mine and extraction project located in Minas Gerais State. It also owns the Farim Project, a phosphate mine project in Guinea-Bissau (GM Jan. 5, 2018).
Itafos cautioned that there can be no assurance that the strategic alternatives review process will result in the company pursuing any transaction or that any alternative transaction will be available to the company.
Neither the Board nor the Committee has set a timetable for completion of the process, and the company does not intend to disclose further developments unless and until it determines that further disclosure is appropriate or necessary.