Mosaic to acquire Vale Fertilizantes for $2.5b

Acquisition creates leading fertilizer company in Brazil.

The Mosaic Co. announced that it has agreed to acquire the Vale Fertilizantes business of Vale S.A. for an aggregate purchase price valued at $2.5 billion. Vale will have the potential to earn an additional amount of up to $260 million to be paid in cash over the two-year period following closing if certain financial metrics are achieved.

Upon closing, Mosaic expects to become the leading fertilizer production and distribution company in Brazil, one of the world's pre-eminent agricultural markets.

"This acquisition provides Mosaic a tremendous opportunity to capitalize on the fast-growing Brazilian agricultural market and from improving business conditions," Mosaic president and chief executive officer Joc O'Rourke said. "We see this as an ideal strategic fit for Mosaic. We have proven expertise in phosphate mining and manufacturing, a strong record of successful acquisition integration and extensive relationships and experience in Brazil."

Mosaic intends to fund the acquisition with $1.25 billion in cash, which it plans to raise through the issuance of debt, and approximately 42.3 million shares of its common stock that will be issued to Vale at closing and are expected to represent approximately 11% of Mosaic's outstanding shares.

The acquisition is expected to be accretive to Mosaic's earnings per share in 2018, generate over $80 million of after-tax synergies and provide substantial leverage to improvements in the crop nutrient business cycle.

The business to be acquired currently has the capacity to produce 4.8 million metric tons of finished phosphate crop nutrients and 500,000 mt of potash. It includes five Brazilian phosphate rock mines and four chemical and fertilizer production facilities, as well as one potash facility in Brazil.

Through the acquisition, Mosaic also will acquire Vale's 40% economic interest in the Miski Mayo phosphate mine in Peru and its potash project at Kronau, Sask. Mosaic has the option to include the Rio Colorado, Argentina, potash project at closing as part of the transaction, subject to Mosaic's agreement following appropriate diligence. The transaction excludes Vale's Cubatao-based nitrogen and non-integrated phosphate business, which is required to be carved out of Vale Fertilizantes prior to closing.

"Mosaic has agreed to acquire high-quality and complementary assets in a powerhouse agricultural center that have significant cost advantages at an attractive valuation," said Rich Mack, Mosaic executive vice president and chief financial officer. "We expect this transaction to be both accretive to earnings and cash flow positive, and we will continue our focus on maintaining a solid investment grade credit rating.”

As commodity and crop nutrition markets improve, Mosaic said it will have the ability to meaningfully outperform its competition and generate shareholder value. “Vale will be a valued minority shareholder and partner who will bring significant Brazilian expertise that we believe will benefit Mosaic in the years ahead."

Mosaic's combined fertilizer business in Brazil will be led by Rick McLellan, who is currently senior vice president, commercial. McLellan led the fertilizer business in Brazil when Mosaic was formed in 2004.

"I am excited at the prospect of leading Mosaic's vastly expanding business in Brazil," McLellan said. "This will be an ideal time for us to grow in the region, with the strong Brazilian farm economy and growers across the country working to deliver higher crop yields."

Following the closing, Vale will have the right to designate up to two individuals — one of whom must be independent — for nomination to Mosaic's board of directors, as long as it continues to meet certain ownership thresholds.

Subject to limited exceptions, the Mosaic shares to be issued to Vale may not be transferred for two years following the closing, after which time Vale will have customary registration rights. In connection with its minority interest, Vale has agreed to certain stand-still and lockup obligations and to certain voting agreements.

The transaction is subject to receipt of regulatory approvals and satisfaction of closing conditions, including the completion of the carve-out of the Cubatao-based production facilities from Vale Fertilizantes, and is expected to close in late 2017.

The acquisition will add approximately 8,000 employees, bringing Mosaic's global head count to approximately 17,000.

Mosaic expects that its U.S. phosphate production facilities will continue to operate at high rates in order to meet strong and growing global demand. The company's premium MicroEssentials products are also expected to continue to be produced exclusively in the U.S., with Brazil remaining a key market for MicroEssentials.

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