Mosaic Co. agreed to buy Vale SA’s fertilizer unit for $2.5 billion in cash and stock to become the largest fertilizer producer in Brazil.
Half the price will be paid in cash and the other half in new shares, giving Vale an 11 percent stake in Mosaic and two seats on its board. The transaction is expected to close late next year, pending regulatory approvals, Plymouth, Minnesota-based Mosaic said Monday in a statement.
While Mosaic already operates a port terminal in Brazil, its mines are in the U.S. and Canada. Vale’s fertilizer business includes a phosphate mine in Peru and a potash mine in Brazil. The acquisition will give it assets including five Brazilian phosphate-rock mines and four chemical and fertilizer production plants, plus a 40 percent stake in a Peruvian phosphate mine.
“This acquisition provides Mosaic a tremendous opportunity to capitalize on the fast-growing Brazilian agricultural market and from improving business conditions,” Chief Executive Officer Joc O’Rourke said in the statement. “We see this as an ideal strategic fit for Mosaic.”
Vale can also earn as much as $260 million in cash in the two years after the completion of the Mosaic deal if certain financial metrics are met, according to the companies. Vale share were little changed at 24.35 reais at 10:22 a.m. in Sao Paulo, according to Bloomberg.
Mosaic expects the acquisition will boost earnings by 5 to 10 cents a share in 2018 and generate about $80 million of after-tax cost savings, according to presentation slides posed on its website. It will finance the deal by issuing $1.25 billion of debt next year.
The Vale assets have the capacity to produce 4.8 million mt/y of finished phosphate crop nutrients and 500,000 mt of potash. Mosaic will get Vale’s 40 percent interest in the Miski Mayo phosphate mine in Peru and its Kronau potash project in Saskatchewan, Canada, and the option to include a potash project in Argentina.
The acquisition excludes Vale’s Cubatao-based nitrogen and non-integrated phosphate business.