Valley sells fertilizer assets to Mosaic for $2.5 bi

SAO PAULO-the mining company Vale announced on Monday the sale of fertilizer assets to the Mosaic for about 2.5 billion dollars, in a deal that also will involve the acquisition of minority stake in the U.S. company, according to fact.
Vale said it will receive $1.25 billion in cash and 1.25 billion dollars in common shares to be issued by the Mosaic, with the brazilian mining company moving forward in its strategy to sell assets to reduce debt.
"The Valley continues with its program of disinvestment and will use the funds from this sale to reduce its debt, while remains exposed to the fertilizer business through strategic participation in Mosaic," said the company, noting that the partnership with Mosaic adds substantial value to shareholders of Vale, strengthening the company''s exposure to the world market of fertilizers.
Already the Mosaic should become a leader in the production and distribution of fertilizers in Brazil, one of the most promising markets in the world, said the U.S. company.
"We see this as a strategic combination ideal for Mosaic. We have proven experience in mining and production of phosphate, a large record of successful acquisition integrations, as well as relationships and vast experience in Brazil, "said President and CEO of Mosaic, Joc O''Rourke, in a note.
The traded assets involve units with a production capacity of 4,800,000 tons of phosphate fertilizer and 500,000 tonnes of potassium, according to Mosaic, which expects the acquisition to increase earnings per share of the company in 2018, generating more than 80 million dollars in after-tax synergies.
The American will issue approximately 42,300,000, number that currently represents around 11% of the total outstanding common shares of Mosaic.
Vale said that, subject to specific exceptions, shares of Mosaic issued for brazilian mining company may not be transferred for two years after the completion of the transaction. However, after the period, the brazilian company will have full rights.
After the completion of the transaction, the Valley will have the right to nominate two members of the Board of Directors of Mosaic, added the mining company.
Additionally, the Valley can receive an additional amount of up to $260 million, to be paid in cash during the period of two years after the closing of the agreement, if certain financial metrics are achieved.
Once completed the transaction, the Valley will sell for the Mosaic: phosphate assets located in Brazil, excluding of nitrogenous and phosphatic fertilizers in Cubatão (SP).
The deal also includes participation in Bayovar in Peru; potassium assets located in Brazil, including the Carnallite project; and the potassium project in Canada (Kronau).
The inclusion of the controversial project Colorado River potassium (Argentina)--in which the Valley invested billions--in the scope of the transaction is subject to acceptance of the Mosaic upon completion of due diligence, according to the brazilian mining company.
Vale said that the completion of the transaction is expected for end of 2017 and is subject to the separation of the assets of Cubatão of Fertilizer and compliance with Valley of previous usual conditions, including the approval of the Administrative Council for economic Defense (Cade) and other antitrust authorities.
Preferred shares of Vale, the largest global producer of iron ore, operated virtually stable on Monday. Around 11:02, fell in 0,25% day the futures of iron ore in China had fall of more than 7%.
FINALLY
On June 17, Reuters anticipated that the Mosaic had entered into negotiations to buy the fertilizer unit of the Valley, according to sources with knowledge of the matter. One of the sources said the deal could reach 3 billion dollars.
In a note to clients, BTG Pactual said on Monday that the expected deal was closed in the lowest part of the expectations of 2.5 billion to 3 billion dollars.
But the BTG mentioned that the agreement excludes assets of nitrogenous and phosphatic fertilizers in Cubatão. So it is not possible to compare expectations with the business effectively closed, according to the Bank.
Vale said that hopes to explore the sale of the assets of Cubatão in 2017.
The assets located in Cubatão, which is dedicated mainly to the production of nitrogenous, recorded an adjusted Ebitda of $108 million in 2015.