Mosaic to Buy Vale's Fertilizer Business for $2.5 Billion -- Update
December 19 2016 - 7:55AM
Dow Jones News
By Paul Kiernan
RIO DE JANEIRO -- Brazilian mining firm Vale SA said Monday it
will sell most of its fertilizer business to U.S.-based The Mosaic
Company for around $2.5 billion, the latest step in its effort to
pay down debt amid the commodity downturn.
Excluded from the transaction are nitrogen and phosphate assets
in Cubatão, Brazil, which generated cash flow of $108 million in
2015, Vale said.
The deal brings an end to Vale's one-time hopes capitalizing on
the long-term need for agricultural inputs as a growing global
population demands more food. Formerly considered a small but
strategic business in the mining giant's sprawling empire, Vale's
fertilizer unit had failed to get off the ground in recent
years.
The biggest setback came in 2013, when Vale indefinitely
suspended a $5.92 billion potash project in Argentina due to high
costs and political difficulties. Since then, the fertilizer
business has significantly lagged behind Vale's iron-ore and
base-metals operations, accounting for just 8% of the company's
overall revenue in the third quarter and posting negative earnings
before interest and taxes.
At the same time, Vale's finances grew precarious earlier this
year as iron-ore prices crashed and the company struggled with the
fallout of a major disaster at its Samarco joint venture in
November 2015.
Rumors have swirled for months that Mosaic could buy the
fertilizer business from Vale, with local news reports putting the
price tag at $3 billion.
Mosaic and Vale expect to close the deal at the end of 2017.
Half the transaction amount should be paid to Vale in cash and the
other via the issuance of an estimated 42.3 million shares in
Mosaic, equivalent to about 11% of the latter company's
capital.
Vale said it expects to explore options for the Cubatão assets
next year.
Write to Paul Kiernan at paul.kiernan@wsj.com
(END) Dow Jones Newswires
December 19, 2016 07:40 ET (12:40 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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