Exclusive: Mosaic eyes Vale's fertilizer business, sources say

Fri Jun 17, 2016 1:30pm EDT
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By Tatiana Bautzer and Guillermo Parra-Bernal

SAO PAULO (Reuters) - Mosaic Co, the world's top producer of concentrated phosphate, has entered talks to buy Vale SA's fertilizer unit, in a renewed push to grow in South America and Africa, three sources with direct knowledge of the matter said.

Although both companies are discussing what structure would best suit their interests, the first source said a cash-and-stock deal remains the preferred option. The source, who asked for anonymity as talks are under way, valued the unit at about $3 billion.

Under terms of the first option, Rio de Janeiro-based Vale would become Mosaic's biggest shareholder, with a stake between 12 percent and 15 percent depending on the size of the deal's stock portion, the first source said. Other alternatives for the deal are being considered, the sources said, without elaborating.

The companies declined to comment.

Non-voting shares of Vale, the company's most widely traded class of stock, jumped as much as 4 percent on the news. Mosaic rose 2.6 percent to $26.57 in early New York trading on Friday.

Plymouth, Minnesota-based Mosaic is on the lookout for phosphate or potash assets that could be bargain-priced in a weak commodity sector, Chief Executive Officer Joc O'Rourke said in February. Falling prices of phosphate and potash, however, have dragged down profit this year.

Vale has fertilizer assets in Canada, Brazil, Peru, Argentina and Mozambique. Mosaic bought distribution assets from Archer Daniels Midland Co in Brazil and Paraguay last year.

In Brazil, the world's fifth-largest fertilizer consumer, demand is expected to grow twice as fast as global demand until 2025. Fertilizer sales in Brazil in the first 10 weeks of this year doubled from the same period a year earlier.   Continued...