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Mosaic-CF Industries Deal Gets DOJ Nod

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Fertilizer maker The Mosaic Company (MOS - Free Report) said that it has received the green light from the United States Department of Justice (DOJ) for its earlier announced takeover of CF Industries, Inc.’s (CF - Free Report) phosphate business.

Mosaic, in Oct 2013, landed a definitive deal to buy the phosphate mining and manufacturing business of CF Industries for $1.4 billion (including $200 million to fund CF Industries’ asset retirement obligation escrow). The closing of the transaction is now subject to receipt of other regulatory clearances.  

Under the deal, CF Industries agreed to dispose the Hardee County phosphate rock mine, the Plant City phosphate complex, an ammonia terminal, phosphate warehouse and dock at the Port of Tampa and the site of the former Bartow phosphate complex to Mosaic. The facilities to be acquired by Mosaic currently produce roughly 1.8 million tons of phosphate fertilizer per year.

The deal is also subject to a long-term ammonia supply agreement, under which, CF Industries will supply ammonia to Mosaic from its Donaldsonville, La., nitrogen complex. The company will also supply ammonia to Mosaic from its 50% owned Point Lisas Nitrogen Ltd. (PLNL) facility in the Republic of Trinidad and Tobago.

Under the Donaldsonville ammonia agreement, CF Industries will supply between 600,000 and 800,000 tons of ammonia per year for up to 15 years, which is expected to begin by 2017. The ammonia to be supplied will be used for phosphate production and its price will depend on the cost of natural gas delivered to Donaldsonville.

The acquisition is expected to add roughly 30 cents per share to Mosaic's earnings per share in 2015. The buyout will expand the company's phosphate business and production capacity of the nutrient in Florida.

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 sees healthy demand in North America based on excellent crop nutrient affordability, it expects a challenging pricing environment.

Mosaic, which currently holds a Zacks Rank #3 (Hold), will report its fourth-quarter results on Feb 11.

Other fertilizer companies with favorable Zacks Rank are China Bluechip and Intrepid Potash, Inc. (IPI - Free Report) . While China Bluechip carries a Zacks Rank #1 (Strong Buy), Intrepid Potash holds a Zacks Rank #2 (Buy).

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