UPDATE 1-Brazil's Vale shares jump on talk of fertilizer unit sale

Wed Sep 21, 2016 7:14pm EDT
 
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(Updates share performance, size and scope throughout)

SAO PAULO, Sept 21 (Reuters) - Shares in Brazil's Vale SA rose the most in almost 15 weeks on Wednesday on speculation the world's largest iron ore producer would announce the partial sale of a unit to U.S. fertilizer producer Mosaic Co later in the day.

An O Globo newspaper online blog said Vale's board was scheduled to approve the $3 billion deal that would combine its fertilizer and phosphate assets. The blog, which did not say how it obtained the information, also said that the disposal of the remaining 25 percent of Vale's agricultural chemicals assets was being negotiated with an undisclosed bidder for $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 an announcement of the deal was unlikely on Wednesday, the transaction was in an advanced stage.

Preferred shares of Vale rose as much as 6.3 percent to 15.27 reais, the biggest intraday rise since June 3. The stock had shed about 7 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. People familiar with the matter 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 would 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 and Diane Craft)