Fertilizer maker The Mosaic Company (MOS - Free Report) has landed an agreement to buyback 43.3 million shares from the Margaret A. Cargill Foundation and the Anne Ray Charitable Trust (“the MAC Trusts”) over the next eight months.
Under the share repurchase agreement, the Minnesota-based company will buy 21.7 million of the MAC Trusts' Class A shares on January 8, 2014. The balance 21.6 million shares will be bought by Mosaic beginning in February 2014 in seven equal installments. The purchase price will be determined by the volume weighted average closing price of the company’s common stock during the preceding 20-day trading period.
Mosaic was formed in 2014 through the combination of the fertilizer businesses of agribusiness giant Cargill Incorporated and IMC Global Inc.
Cargill sold its 64% interest (285.8 million shares) in Mosaic in 2011 in a split-off to its shareholders, including the MAC Trusts, and a debt exchange with some of its debt holders. Following the stake sale, the MAC Trusts and Cargill debt holders sold 157 million of these shares in secondary offerings or to Mosaic, thereby completing the disposition of shares designated to be sold during the 15-month period after the split off.
The remaining 128.8 million shares received by the MAC Trusts and other shareholders were subject to transfer restrictions, which were removed on Nov 26, 2013. Mosaic has been in talks with Cargill and the MAC Trusts, following May 26, 2013, regarding the disposition of the Class A shares, including potential share repurchases.
The repurchase deal represents a significant step in achieving Mosaic’s objective of having a more efficient balance sheet by the middle of next year. The company is also looking for other options to return value to shareholders.
Mosaic’s shares, which are down roughly 17% so far this year, fell 1.7% to close at $46 yesterday.
Fertilizer producers are grappling with weak pricing. Mosaic and other fertilizers makers face significant challenges following the exit of world's largest potash maker Uralkali Group from one of the biggest potash cartels – the Belarus Potash Company (BPC).
Mosaic had a lackluster third-quarter 2013, reported on Nov 5, with profit tumbling 70% year over year to $124 million or 29 cents per share. The bottom line was hit by lower potash and phosphate pricing, cautious buyer behavior and a late fall application season in North America.
Revenues fell roughly 28% year over year to $1,908.7 million. Double-digit declines across phosphate and potash franchises on lower selling prices dragged down the top line. The company witnessed lower sales volumes in both businesses in the quarter.
While Mosaic envisions healthy demand in North America based on excellent crop nutrient affordability, it expects a challenging pricing environment.
Mosaic is a Zacks Rank #4 (Sell) stock.
Other stocks in the fertilizer and related industries with favorable Zacks Rank are China Bluechip ADR , The Andersons, Inc. (ANDE - Free Report) and The Scotts Miracle-Gro Co. (SMG - Free Report) . While China Bluechip and The Andersons carry a Zacks Rank #1 (Strong Buy), Scotts Miracle-Gro holds a Zacks Rank #2 (Buy).