Brazil's Vale shares jump on talk of fertilizer unit sale

Wed Sep 21, 2016 11:20am EDT
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SAO PAULO, Sept 21 (Reuters) - Shares in Vale SA rose the most in almost three weeks on Wednesday on speculation the world's largest iron ore producer would announce sale of 75 percent of a fertilizers unit to Mosaic Co later in the day.

An O Globo newspaper online blog said Vale's board would meet to approve the $3 billion deal. The blog, which did not say how it obtained the information, also said sale of the remaining 25 percent of the unit was being negotiated with an undisclosed bidder for about $1 billion.

Rio de Janeiro-based Vale and Plymouth, Minnesota-based Mosaic declined to comment. Three people familiar with the process told Reuters that, while announcement of the deal was unlikely on Wednesday, the transaction was in an advanced stage.

Preferred shares of Vale rose as much as 3.7 percent to 14.89 reais, the biggest intraday rise since Sept. 2. The stock had shed about 4.5 percent over the past month, on concern that weak iron ore prices and a slower-than-expected pace in planned asset sales may delay efforts to cut debt.

Based on the information of O Globo's Lauro Jardim blog, Mosaic would pay the equivalent of 15 times the unit's operational earnings, a "very accretive multiple," according to a Banco BTG Pactual trading desk note.

On June 17, Reuters reported that Mosaic was eyeing the totality of Vale's fertilizer assets, in a cash-and-stock deal valued at about $3 billion. Vale has fertilizer assets in Canada, Brazil, Peru, Argentina and Mozambique.

Brazil is the world's fifth-largest fertilizer consumer, and remains a key growth spot for fertilizer and phosphate producers. The people told Reuters talks with Vale have regained momentum in recent weeks after Canada's Agrium Inc and Potash Corp of Saskatchewan Inc announced a planned merger on Aug. 30.

If concluded, the Agrium-Potash deal will create a fertilizer and farm retailing giant worth more than $25 billion. (Reporting by Guillermo Parra-Bernal and Tatiana Bautzer; Additional reporting by Bruno Federowski and Brad Haynes in São Paulo; Editing by David Gregorio)