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Mosaic (MOS) to Buy Vale Fertilizantes for $2.5 Billion
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The Mosaic Company (MOS - Free Report) has agreed to buy Brazil-based Vale S.A.’s Vale Fertilizantes business for $2.5 billion. The transaction is expected to conclude in late 2017, subject to customary closing conditions.
The Acquisition
The Vale Fertilizantes business of Vale S.A. that Mosaic intends to acquire, consists of five phosphate rock mines in Brazil and four chemical and fertilizer manufacturing facilities, along with one potash facility in Brazil. Currently, the business has the capacity to manufacture 4.8 million tons of finished phosphate crop nutrients as well as 500,000 tons of potash. Mosaic will also be acquiring Vale's 40% interest in a phosphate mine in Peru, Miski Mayo, as well as the company’s potash project at Kronau, Canada.
Moreover, Mosaic has an option to acquire the company’s potash project at Rio Colorado, Argentina at closing, as part of the deal. The addition of the potash project at Rio Colorado in the transaction is subject to Mosaic's agreement post its due diligence. The acquisition deal excludes Vale's Cubatao-based nitrogen and non-integrated phosphate business. The business is required to be carved out of Vale Fertilizantes prior to closing.
The transaction will increase Mosaic's global employee headcount by 8,000 taking it to a total of around 17,000.
Terms of the Deal
Mosaic will be funding the acquisition with $1.25 billion cash and roughly 42.3 million shares of its common stock. The company intends to raise cash by issuing debt. The shares that will be given to Vale shareholders represent about 11% of the outstanding shares of Mosaic. Additionally, Vale may receive up to $260 million over a two-year time horizon if certain financial metrics are attained.
Vale will be able to select up to two individuals, of whom one must be independent, to nominate for Mosaic's Board of Directors, as long as it continues to meet certain ownership thresholds in the acquiring company, on the conclusion of the deal. Subject to limited exceptions, Mosaic’s shares which will be issued to Vale may not be transferred for two years after the closing, post which Vale will have customary registration rights. Regarding its minority interest, Vale has agreed to some stand-still and lockup obligations, as well as to certain voting agreements.
The deal is subject to regulatory approvals as well as satisfactory closing conditions, which includes carving out of the Cubatao-based manufacturing facilities from the Vale Fertilizantes business.
Mosaic’s financial advisors for the deal were J.P. Morgan Securities and UBS Investment Bank while Simpson Thacher & Bartlett LLP and Lobo & de Rizzo Advogados served as legal counsels.
Impact on Mosaic
On completion of the acquisition, Mosaic expects to become the leading fertilizer manufacturing and distribution company in Brazil, one of the best agricultural markets globally. The deal is expected to help the company to capitalize on the rapidly growing Brazilian agricultural market and the improving business conditions.
The acquisition is expected to be accretive to Mosaic's earnings per share in 2018. It is projected to generate more than $80 million of post-tax synergies along with providing considerable leverage to improvements in the crop nutrient business cycle to the company.
Shares of Mosaic fell roughly 6.1% to close at $27.77 on Dec 19.
The company’s shares have increased 9.7% in the last 3 months, underperforming the Zacks categorized ‘Fertilizers’ industry’s gain of 13.1% over the same period. While Mosaic faces headwinds from depressed nutrient prices, it should benefit from cost-cutting actions, acquisitions and efforts to boost production capacity.
Stocks to Consider
Mosaic holds a Zacks Rank #2 (Buy).
Other well-ranked companies in the basic materials space include The Chemours Company (CC - Free Report) , FMC Corp. (FMC - Free Report) and Celanese Corp. (CE - Free Report) .
FMC, sporting a Zacks Rank #1, has an expected long-term growth of 10.88%.
Celanese has an expected long-term growth of 8.75% and holds a Zacks Rank #2.
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Mosaic (MOS) to Buy Vale Fertilizantes for $2.5 Billion
The Mosaic Company (MOS - Free Report) has agreed to buy Brazil-based Vale S.A.’s Vale Fertilizantes business for $2.5 billion. The transaction is expected to conclude in late 2017, subject to customary closing conditions.
The Acquisition
The Vale Fertilizantes business of Vale S.A. that Mosaic intends to acquire, consists of five phosphate rock mines in Brazil and four chemical and fertilizer manufacturing facilities, along with one potash facility in Brazil. Currently, the business has the capacity to manufacture 4.8 million tons of finished phosphate crop nutrients as well as 500,000 tons of potash. Mosaic will also be acquiring Vale's 40% interest in a phosphate mine in Peru, Miski Mayo, as well as the company’s potash project at Kronau, Canada.
Moreover, Mosaic has an option to acquire the company’s potash project at Rio Colorado, Argentina at closing, as part of the deal. The addition of the potash project at Rio Colorado in the transaction is subject to Mosaic's agreement post its due diligence. The acquisition deal excludes Vale's Cubatao-based nitrogen and non-integrated phosphate business. The business is required to be carved out of Vale Fertilizantes prior to closing.
The transaction will increase Mosaic's global employee headcount by 8,000 taking it to a total of around 17,000.
Terms of the Deal
Mosaic will be funding the acquisition with $1.25 billion cash and roughly 42.3 million shares of its common stock. The company intends to raise cash by issuing debt. The shares that will be given to Vale shareholders represent about 11% of the outstanding shares of Mosaic. Additionally, Vale may receive up to $260 million over a two-year time horizon if certain financial metrics are attained.
Vale will be able to select up to two individuals, of whom one must be independent, to nominate for Mosaic's Board of Directors, as long as it continues to meet certain ownership thresholds in the acquiring company, on the conclusion of the deal. Subject to limited exceptions, Mosaic’s shares which will be issued to Vale may not be transferred for two years after the closing, post which Vale will have customary registration rights. Regarding its minority interest, Vale has agreed to some stand-still and lockup obligations, as well as to certain voting agreements.
The deal is subject to regulatory approvals as well as satisfactory closing conditions, which includes carving out of the Cubatao-based manufacturing facilities from the Vale Fertilizantes business.
Mosaic’s financial advisors for the deal were J.P. Morgan Securities and UBS Investment Bank while Simpson Thacher & Bartlett LLP and Lobo & de Rizzo Advogados served as legal counsels.
Impact on Mosaic
On completion of the acquisition, Mosaic expects to become the leading fertilizer manufacturing and distribution company in Brazil, one of the best agricultural markets globally. The deal is expected to help the company to capitalize on the rapidly growing Brazilian agricultural market and the improving business conditions.
The acquisition is expected to be accretive to Mosaic's earnings per share in 2018. It is projected to generate more than $80 million of post-tax synergies along with providing considerable leverage to improvements in the crop nutrient business cycle to the company.
Shares of Mosaic fell roughly 6.1% to close at $27.77 on Dec 19.
MOSAIC CO/THE Price
MOSAIC CO/THE Price | MOSAIC CO/THE Quote
The company’s shares have increased 9.7% in the last 3 months, underperforming the Zacks categorized ‘Fertilizers’ industry’s gain of 13.1% over the same period. While Mosaic faces headwinds from depressed nutrient prices, it should benefit from cost-cutting actions, acquisitions and efforts to boost production capacity.
Stocks to Consider
Mosaic holds a Zacks Rank #2 (Buy).
Other well-ranked companies in the basic materials space include The Chemours Company (CC - Free Report) , FMC Corp. (FMC - Free Report) and Celanese Corp. (CE - Free Report) .
Chemours has an expected long-term growth of 15.5% and sports a Zacks Rank #1 (Strong Buy). You can the complete list of today’s Zacks #1 Rank stocks here.
FMC, sporting a Zacks Rank #1, has an expected long-term growth of 10.88%.
Celanese has an expected long-term growth of 8.75% and holds a Zacks Rank #2.
Zacks' Top Investment Ideas for Long-Term Profit
How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>