Yara International ASA has acquired a controlling interest in Fertibras, a Brazilian fertilizer distribution and marketing company. The total purchase price for 48.09 percent of the shares in Fertibras, constituting 99.95 percent of voting shares, was $126 million.
“Brazil is one of the most important fertilizer markets in the world and is key to our growth strategy,” said Thorleif Enger, Yara president and CEO. “Yara already has a strong market position and an efficient operation in the country based on the acquisition of Adubos Trevo in 2000. The acquisition of Fertibras will further strengthen Yara’s position and scale, and create a strong platform for further consolidation of the Brazilian fertilizer industry.”
Fertibras has sales of up to 1 million mt of fertilizer annually in Brazil through its ownership of a number of warehouses and bulk blending plants. After the transaction, Yara/Fertibras will be the second largest fertilizer company in Brazil.
Fertibras also holds a 15 percent position in Fosfertil, the biggest producer of nitrogen and phosphate fertilizers in Brazil. Fosfertil total production capacity after recent expansions amounts to about 2.6 million mt of phosphate fertilizer, almost 1 million mt of nitrogen fertilizer, and about 0.3 million mt of industrial products. The main ammonia production is based on the same technology in use at Yara’s plant in Brunsbüttel, which uses heavy fuel oil from a neighboring refinery.
Yara/Fertibras will continue to be entitled to a seat on the Fosfertil board of directors. Yara says the minority stake will give it access to local production and a distribution network that complements its existing market positions. At the same time, it will offer significant opportunities to realize synergies between the two organizations.
Fertibras, which will be consolidated in Yara’s accounts, had a net interest bearing debt of $77 million at the end of 2005. Fertibras is listed on the Sao Paulo Stock Exchange; the other shareholders are primarily investment funds. Brazilian authorities must approve the deal, and this approval will only be given after the transaction is effective.
Yara notes that Brazil is one of the fastest growing fertilizer markets, with a 6 percent average annual growth rate over the last ten years and much room for further expansion. Brazil imports approximately 60 percent of its fertilizer consumption.