March 2, 2015 / 8:54 PM / in 3 years

UPDATE 1-PotashCorp buys 9.5 pct in Heringer to expand in Brazil

(New throughout, adds details on transaction, updates share price)

By Guillermo Parra-Bernal and Ashutosh Pandey

SAO PAULO, March 2 (Reuters) - Potash Corporation of Saskatchewan Inc, the world’s largest fertilizer company by market value, agreed on Monday to pay about $56 million for a 9.5 percent stake in Brazilian rival Fertilizantes Heringer SA, the latest effort by Potash to grow in Latin America’s largest economy.

The deal, which is expected to close in the second half of this year, paves the way for PotashCorp to become Heringer’s principal potash supplier over time, the Canadian company said in a statement. The transaction is subject to regulatory approval in Brazil.

Under terms of the agreement, PotashCorp will acquire the stake from Heringer’s controlling shareholders Dalton Dias Heringer, Dalton Carlos Heringer and Juliana Heringer Rezende, a source with knowledge of the deal said. As part of the deal, the Heringers signed a shareholder agreement granting PotashCorp minority rights, the source added.

PotashCorp paid about 31.15 reais per share for the stake, almost nine times Heringer’s closing price of 3.51 reais on Friday, according to the source. Shares of Heringer posted their biggest intraday surge in more than six years on Monday, surging almost 17 percent to 4.10 reais.

Heringer, one of the largest fertilizer companies in Brazil, delivered 5 million tonnes of fertilizers, including about 1 million tonnes of potash in 2013, with net revenue of about $2.5 billion. Last year, the Heringers sold a 10 percent stake to Morocco’s OCP SA for about $55 million.

The Heringer investment provides PotashCorp “with an important stake in a leading Brazilian fertilizer distribution company,” PotashCorp Chief Executive Officer Jochen Tilk said in the statement.

Itaú BBA, the wholesale and investment-banking unit of Itaú Unibanco Holding SA, and law firm Machado Meyer Sendacz Opice advised Heringer on the stake sale. Potash was advised by law firms Jones Day and Demarest e Almeida Advogados, the source said. (Editing by Joyjeet Das and Christian Plumb)

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