Mosaic to Buy Vale's Fertilizer Business for $2.5 Billion -- Update

By Paul Kiernan 

RIO DE JANEIRO -- Brazilian mining firm Vale SA said Monday it will sell most of its fertilizer business to U.S.-based The Mosaic Company for around $2.5 billion, the latest step in its effort to pay down debt amid the commodity downturn.

Excluded from the transaction are nitrogen and phosphate assets in Cubatão, Brazil, which generated cash flow of $108 million in 2015, Vale said.

The deal brings an end to Vale's one-time hopes capitalizing on the long-term need for agricultural inputs as a growing global population demands more food. Formerly considered a small but strategic business in the mining giant's sprawling empire, Vale's fertilizer unit had failed to get off the ground in recent years.

The biggest setback came in 2013, when Vale indefinitely suspended a $5.92 billion potash project in Argentina due to high costs and political difficulties. Since then, the fertilizer business has significantly lagged behind Vale's iron-ore and base-metals operations, accounting for just 8% of the company's overall revenue in the third quarter and posting negative earnings before interest and taxes.

At the same time, Vale's finances grew precarious earlier this year as iron-ore prices crashed and the company struggled with the fallout of a major disaster at its Samarco joint venture in November 2015.

Rumors have swirled for months that Mosaic could buy the fertilizer business from Vale, with local news reports putting the price tag at $3 billion.

Mosaic and Vale expect to close the deal at the end of 2017. Half the transaction amount should be paid to Vale in cash and the other via the issuance of an estimated 42.3 million shares in Mosaic, equivalent to about 11% of the latter company's capital.

Vale said it expects to explore options for the Cubatão assets next year.

Write to Paul Kiernan at [e-mail]

(END) Dow Jones Newswires

December 19, 2016 07:40 ET (12:40 GMT)

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