Item 1.01.
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Entry into a Material Definitive Agreement.
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Stock Purchase Agreement
On December 19, 2016, The Mosaic Company (
Mosaic
) entered into a Stock Purchase Agreement (the
Stock Purchase
Agreement
) with Vale S.A. (
Vale
) and Vale Fertilizer Netherlands B.V. (
Vale Netherlands
and, together with Vale and certain of its affiliates, the
Sellers
), pursuant to which Mosaic
agreed, upon the terms and subject to the conditions set forth in the Stock Purchase Agreement, to purchase from the Sellers (the
Purchase
) Vales global phosphate and potash operations conducted through Vale Fertilizantes
S.A. (the
Company
), with the Purchase to be effected through the acquisition by Mosaic of all of the issued and outstanding capital stock of the Company. The aggregate consideration to be paid by Mosaic to the Sellers is comprised
of (i) $1.25 billion in cash and (ii) 42,286,874 shares of Mosaic common stock, par value $0.01 per share to be issued and delivered to Vale or an affiliate of Vale. The cash portion of the purchase price is subject to adjustments based on
matters such as the working capital and indebtedness balances of the Company at the time of the closing. In addition, the Sellers will be entitled to receive an additional amount in cash of up to $260 million if certain thresholds relating to
the pricing of monoammonium phosphate and the strength of the Brazilian Real over the two year-period following the closing of the Purchase are satisfied.
The Company and its subsidiaries (collectively, the
Company Group
) conduct global phosphate and potash operations, including facilities and
projects in the provinces of Minas Gerais, Goiás, Sergipe and São Paulo, Brazil, Saskatchewan, Canada, and Mendoza, Argentina. The Company Group also operates certain industrial complexes located in the City of Cubatão (the
Cubatão Business
). The Cubatão Business will not be included in the Purchase and will instead be transferred, prior to the closing of the Purchase, to affiliates of the Sellers. As part of the Purchase, Mosaic will
acquire the Sellers 40% economic interest in the joint venture which owns the Miski Mayo phosphate rock mine in the Bayovar region of Peru, in which Mosaic already holds a 35% economic interest on the date of this report, and Vales
potash project at Kronau, Saskatchewan. In addition, under the Stock Purchase Agreement, Mosaic has an option to acquire the Sellers Rio Colorado, Argentina, potash project as part of the Purchase.
Closing Conditions
The closing of the proposed Purchase
is subject to number of conditions, including, among others, (i) completion of the transfer of the Cubatão Business from the Company Group to affiliates of the Sellers as well as other restructuring transactions, (ii) the expiration
or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and antitrust approvals in Brazil and Canada, (iii) the achievement of certain other specified regulatory and
operational milestones (the
Regulatory Milestones Condition
), (iv) the absence of any governmental restraint due to the recent water loss incident at Mosaics New Wales facility in Florida that results in a reduction or
suspension of operations or increased operating costs at the facility and would reasonably be expected to materially adversely impact Mosaic and its subsidiaries, taken as a whole (the
New Wales Condition
), (v) receipt of certain
third party consents and (vi) other customary closing conditions.
Termination; Termination Fee; Expense Reimbursement
The Stock Purchase Agreement may be terminated by Mosaic or the Sellers in certain circumstances, including, if the Purchase has not been consummated by
December 31, 2017.
If the Stock Purchase Agreement is terminated by Mosaic or Vale because the Sellers have not obtained certain specified third
party consents within 75 days after the date of the Stock Purchase Agreement, the Sellers may be required to pay Mosaic a termination fee of $125 million. In addition, Mosaic or the Sellers, as the case may be, will be required to reimburse the
other partys costs and expenses incurred in connection with the Stock Purchase Agreement up to a maximum amount of $30 million if the Stock Purchase Agreement is terminated because the Purchase has not been consummated by
December 31, 2017 and the only condition that is not satisfied on that date is, in the case of Mosaic, the New Wales Condition and, in the case of the Sellers, the Regulatory Milestones Condition.
Representations and Warranties; Covenants; Indemnification
Mosaic and the Sellers each have made customary representations and warranties and covenants in the Stock Purchase Agreement. The Sellers have further agreed
not to solicit alternative transactions or engage in discussions concerning, or provide confidential information in connection with, an alternative transaction. Mosaic and the Sellers have agreed to indemnify each other following the closing of the
Purchase for breaches of representations and warranties, breaches of covenants and certain other matters, subject to certain conditions and limitations set forth in the Stock Purchase Agreement.
Appointment of Vale Designee to Mosaic Board of Directors
In the Stock Purchase Agreement, Mosaic agreed to enter into an Investor Agreement with Vale (the
Investor Agreement
), effective as of the
closing of the Purchase, that will, among other things, provide Vale with certain rights to designate up to two individuals to Mosaics Board of Directors. The Investor Agreement is discussed further below.
Investor Agreement
Concurrently with the closing of the Purchase, Mosaic and the Sellers will enter into an Investor Agreement (the
Investor Agreement
).
Director Designation Rights
The Investor Agreement will
provide that (i) so long as affiliates of Vale (the
Vale Stockholders
) beneficially own a number of shares of Mosaic common stock representing at least 90% of the shares to be issued to them at the closing of the Purchase
(together with any shares of Mosaic common stock received by the Vale Stockholders in connection with any stock split, stock dividend or similar transaction, the
Shares
), the Vale Stockholders
will be entitled to designate
two individuals for nomination to Mosaics Board of Directors and (ii) so long as the Vale Stockholders beneficially own a number of shares of Mosaic common stock representing at least 50% of the Shares (but less than 90% of the Shares),
the Vale Stockholders
will be entitled to designate one individual for nomination to Mosaics Board of Directors, in each case, at each stockholders meeting at which directors of Mosaic are elected. Each individual nominated by the Vale
Stockholders must meet the standards and qualifications set forth in the Investor Agreement upon the reasonable determination of Mosaics Board of Directors or its Corporate Governance and Nominating Committee. So long as the Vale Stockholders
have the right to designate two nominees, the Vale Stockholders may only designate one nominee who is then serving as a director, officer or employee of Vale or any of its subsidiaries and, if the Vale Stockholders designate two nominees, one of the
two designees must be independent with respect to Mosaic under the rules governing companies listed on the New York Stock Exchange and under Mosaics Director Independence Standards.
Transfer and Standstill Restrictions
The Investor
Agreement will also provide that, during the
two-year
period following the closing of the Purchase, the Vale Stockholders may not transfer any of the Shares that they beneficially own, except that the Vale
Stockholders may transfer Shares to one or more of their respective affiliates, with the written consent of Mosaic or in connection with a business combination transaction involving Mosaic (including a third party tender or exchange offer that is
recommended by Mosaics Board of Directors). So long as the Vale Stockholders beneficially own 5% or more of the outstanding voting securities of Mosaic, however, the Vale Stockholders may not, subject to certain specified exceptions, transfer
any Shares to (i) any person if, after giving effect to such transfer, such person would beneficially own voting securities that represent 5% or more of the total voting power of Mosaic or (ii) certain specified competitors of Mosaic and
other persons identified in the Investor Agreement.
In addition, during the period (the
Standstill Period
) from the closing of the
Purchase until the later of the third anniversary of the closing of the Purchase and the date on which Mosaics Board of Directors no longer includes any designees of the Vale Stockholders, Vale and the Vale Stockholders
will be subject
to certain standstill restrictions. Under such standstill restrictions, Vale and the Vale Stockholders may not, among other things, acquire any shares of Mosaic common stock, except that (i) if, at the closing of the Purchase, the shares to be
received by the Vale Stockholders at the closing of the Purchase represent less than 15% of the total voting power of Mosaic, the Vale Stockholders may, during the subsequent
2-year
period, acquire additional
shares of Mosaic common stock so long as the shares of Mosaic common stock beneficially held by the Vale Stockholders Shares (including such additional shares of Mosaic common stock) do not represent more than 15% of the total voting power of Mosaic
and (ii) so long as the Vale Stockholders have the right to designate at least one director nominee, the Vale Stockholders may, in connection with a bona fide registered public offering by Mosaic of voting securities for cash for its own
account, acquire additional shares of Mosaic common stock in the open market or, under certain circumstances, pursuant to such public registered offering so long as, immediately after such acquisition, the total voting power represented by the
Mosaic common stock beneficially owned by the Vale Stockholders immediately following the acquisition is not greater than the total voting power represented by the Mosaic common stock beneficially owned by the Vale Stockholders immediately prior to
such acquisition.
Voting Agreement
During the
Standstill Period, the Vale Stockholders will vote all voting securities of Mosaic that they beneficially own (i) with respect to any proposal or resolution relating to the election of directors, in accordance with the recommendation of
Mosaics Board of Directors and (ii) with respect to any other proposal or resolution, at their election, either in the same manner as, and in the same proportion to, all voting securities that are not beneficially held by the Vale
Stockholders are voted or in accordance with the recommendation of Mosaics Board of Directors. After the date on which the Mosaic Board no longer includes a nominee designated by the Vale Stockholders, the Vale Stockholders may vote all of the
voting securities of Mosaic they beneficially own in their sole discretion with respect to any proposal or resolution relating to any merger, consolidation, business combination or other extraordinary transaction involving Mosaic or any of its
subsidiaries.
Non-Competition
and
Non-Solicitation
Covenants;
Registration Rights; Termination
Under the Investor Agreement, Vale and the Vale Stockholders agreed to a three-year
non-competition
and a
two-year
employee
non-solicitation
covenant. In addition, the Vale Stockholders will be entitled to certain
demand and customary piggyback registration rights beginning on the 2
nd
anniversary of the closing of the Purchase.
Except for certain specified provisions, the Investor Agreement will terminate (i) upon the mutual agreement
of the parties thereto or (ii) upon the later to occur of (x) the 3rd anniversary of the closing of the Purchase and (y) the date on which the Vale Stockholders no longer beneficially own any Shares.
Additional Information
The foregoing descriptions
of the Stock Purchase Agreement and the Investor Agreement do not purport to be complete and are subject to, and qualified in their entirety by reference to, the full text of the Stock Purchase Agreement and the form of Investor Agreement,
respectively, copies of which are attached as Exhibits 2.1 and 2.2, respectively, to this Current Report on Form
8-K
and are incorporated herein by reference.
The Stock Purchase Agreement and the Investor Agreement have been attached as Exhibits to this Current Report on Form
8-K
to provide investors with information regarding their respective terms. They are not, however, intended to provide any other factual information about Mosaic, Vale or their respective subsidiaries or
affiliates. The representations, warranties and covenants contained in the Stock Purchase Agreement and the Investor Agreement: (i) were made only for the purposes of those agreements and as of specific dates; (ii) were made solely for the
benefit of the parties thereto; (iii) may be subject to limitations agreed upon by such parties, including being qualified by confidential disclosures that were delivered to the parties in connection with the execution and delivery of the Stock
Purchase Agreement and that were made for the purpose of allocating contractual risk between the parties thereto instead of establishing these matters as facts; and (iv) may be subject to standards of materiality applicable to the contracting
parties that differ from what might be viewed as material by investors. Moreover, information concerning the subject matter of the representations, warranties and covenants may change after the dates of the Stock Purchase Agreement or the Investor
Agreement, which subsequent information may or may not be fully reflected in public disclosures by the parties thereto. Accordingly, investors should not rely on the representations, warranties and covenants contained in the Stock Purchase Agreement
or the Investor Agreement or any descriptions thereof as characterizations of the actual state of facts or condition of Mosaic, Vale or any of their respective subsidiaries or affiliates.