Vale to sell fertilizer business to Mosaic for $2.5 billion

Brazil’s Vale (NYSE:VALE), the world’s largest iron ore and nickel miner, said Monday it will sell most of its fertilizer business to US-based Mosaic Co. (NYSE:MOS), the No.1 producer of phosphate fertilizer, in a deal worth about $2.5 billion.

The transaction, part of Vale’s strategy to cut debt and focus on its core businesses, excludes the nitrogen and phosphate assets in Cubatão, Brazil, which generated cash flow of $108 million in 2015, the company said. However, Vale expects to also sell such units next year.

Mosaic has yet to decide whether to include the Rio Colorado potash project in Argentina in the acquisition.

Mosaic has agreed to acquire the rest of Vale's phosphate assets in Brazil, its stake in Peru's Bayovar mine and the firm’s Kronau potash project, in Canada. Mosaic has yet to decide whether to include the Rio Colorado potash project in Argentina in the acquisition.

As a result of the deal, the Rio de Janeiro-based miner will receive $1.25 billion in cash and $1.25 billion in newly issued Mosaic’s shares, equivalent to a nearly 11% stake in the firm. This makes of Vale the US company's biggest shareholder.

The sale, expected to close by the end of 2017, ends Vale’s supremacy on the phosphate market in Brazil, which in turn is the planet's fifth-biggest user of fertilizer.

The world’s largest producer of iron ore and nickel, Vale had long vowed to hold on to world-class operations such as the ones it has agreed to offload today. But in February, it announced it was putting its core assets on the block in a bid to reduce its net debt to $15 billion within 18 months, from $25.23 billion at the end of 2015.

Better commodity prices for iron ore and nickel in the last quarter of the year, however, have prompted Vale to reconsider such drastic decision, the company said last month. For now, the miner's streamlining efforts will continue to be centred on offloading non-core assets, it added.

Vale to sell fertilizer business to Mosaic for $2.5 billion

Most of Vale’s fertilizer assets will be acquired by US-based Mosaic Co., the world’s largest producer of phosphate. (Image courtesy of Vale SA.)