Thursday, July 16, 2009

Vale Rumoured to Buy Mosaic

Brazilian newspaper O Estado de Sao Paulo reports today that Vale may bid for fertilizer company Mosaic. Mosaic, is one of the world's largest producers of concentrated phosphate and potash, the primary nutrients required to grow food grains and other crops.

Mosaic shares are up 12% on the news on very large volume:.

"Global interest in potash has risen sharply in the last couple of years, as a very small group of companies controls about 75% of global supply, and the price has until recently remained stubbornly high."

O Estado de S. Paulo estimates the deal could be worth about US$25-billion, or US$56 per share.

"From a big-picture perspective it fits with Brazil's stated strategy of becoming self-sufficient in fertilizer," said Morningstar analyst Ben Johnson. "Mosaic would be the best fit in terms of the assets that are out there, given that they have got substantial potash and phosphate assets and a distribution network that is already in place."
Earlier this year, Vale spent US$850-million on the purchase of potash assets in Argentina and Canada.

Mosaic, based in Minessota, is a joint venture between Cargill and agricultural firm IMC Global, and has operations in several U.S. states, in Canada's potash-rich Saskatchewan, and controls 62% of Brazilian fertilizer producer Fospar, as well as owning a 42% stake in the Cubatao Fertilizer Industry, which mixes and distributes fertilizers in Brazil, and has a nearly 20% stake in local fertilizer heavyweight Fosfertil.

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