Monday, July 23, 2018
Business

Mosaic to buy fertilizer arm of Brazilian mining giant Vale

RIO DE JANEIRO — The Brazilian mining giant Vale has reached an agreement to sell much of its fertilizer assets to the Mosaic Co. of the United States in a deal worth $2.5 billion, the companies said Monday.

The deal will help Vale reduce its debt, a major problem plaguing many Brazilian companies struggling with a prolonged recession and a weaker local currency. Earlier this year, Vale's chief executive, Murilo Ferreira, said he wanted to reduce the company's debt by $10 billion.

At the same time, it gives Vale an important minority stake in Mosaic and the growing global fertilizer business.

For Mosaic, which is based in Plymouth, Minn. and has major phosphate mining operations in Florida, the acquisition gives it a foothold in Latin America's largest economy, which boasts a strong agriculture sector.

Mosaic's chief executive, James C. O'Rourke, said in a conference call Monday that he was drawn to the deal in part because "Brazil's farm economy has grown at remarkable rates over the past two decades and that growth continues today."

That is even though the country continues to face political and economic upheaval.

As part of the deal, Mosaic will acquire Vale's phosphate assets in Brazil, excluding those in Cubatão; its potash assets in Brazil; the Kronau potash project in Canada; and its shareholding position in Bayóvar, Peru. A Rio Colorado potash project will also be included after due diligence, the companies said.

The transaction is a combination of stock and cash. Half of the $2.5 billion will be in cash, while Mosaic will issue roughly 42.3 million shares of common stock.

The purchase price represents a multiple of 5.4 times the assets' adjusted earnings before interest, taxes, depreciation and amortization for 2015, O'Rourke said.

"We have always said that we look for value-adding opportunities at the low points in the cycle, and that is what we have found here," O'Rourke said.

Vale stands to earn an additional $260 million if certain objectives are met over the two years after the close of the deal. The company will also gain the right to appoint two members to Mosaic's board of directors, one of whom is to be independent.

The companies expect the deal, which requires approval from CADE, Brazil's antitrust regulator, to be completed in late 2017.

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