The world's biggest phosphate fertilizer producer, Minnesota's Mosaic Co., will get bigger with a $1.4 billion deal to buy the Florida-based phosphate business of CF Industries Inc.
The deal announced Monday will give Plymouth-based Mosaic a large mine southeast of the Tampa Bay area and close to Mosaic's existing phosphate operations. The purchase also includes a CF processing plant, which means Mosaic can forego building a proposed new plant of its own — saving $500 million.
"The proximity of the CF assets gives us significant advantages and the transaction is very appealing financially, both in terms of capital expenditures and earnings," Mosaic's Chief Financial Officer Larry Stranghoener said in a conference call with stock analysts.
Mosaic's stock rose 73 cents, or 1.6 percent, closing Monday at $46.67.
Mosaic is one of the world's largest fertilizer makers, mining potash and phosphate and respectively turning them into crop nutrients containing potassium and phosphorus. The company's main potash operations are in Saskatchewan; its phosphate operations in south central Florida.
Several analysts hailed the deal with suburban Chicago-based CF Industries.
"We believe this is a positive for [Mosaic], as it provides the company with more phosphate scale and flexibility, and the price paid is not expensive," Joel Jackson, an analyst with BMO Nesbitt Burns, wrote in a research report.
Mosaic will spend $1.2 billion in cash and another $200 million to fund CF's asset retirement obligation escrow. The purchase is expected to add about 30 cents a share to 2015 earnings. Stranghoener said it will not effect Mosaic's stock buyback program.
In the deal, Mosaic will pick up a 22,000-acre phosphate mine and processing plant in Hardee County in south-central Florida, a factory in Plant City, and an ammonia terminal and warehouses in Tampa.
"The deal gives us significant additional product to meet expected demand growth primarily in North and South America," Stranghoener told analysts.
Mosaic is currently building a phosphate mine in Hardee County. With the purchase of the CF facilities, it would save $500 million because it won't have to build a processing plant for its new mine.
In tandem with the deal, the two companies have reached a long-term agreement for CF to supply Mosaic with ammonia beginning in January 2017. Thus, Mosaic will forego building a proposed ammonia plant in Louisiana, saving $1 billion. Ammonia is a key ingredient in making phosphate-based fertilizer.
"We view the phosphate asset sale from CF to Mosaic as a win/win for both parties as well as the industry at large as it means the proposed Mosaic ammonia plant will not be constructed," Michael Cox, a Piper Jaffray analyst, wrote in a research note.
The CF purchase marks the second major deal Mosaic has done this year in the phosphate sector. In March, the company announced that it would invest $1 billion in a joint venture with a Saudi company to mine phosphate and produce fertilizer in Saudi Arabia. That deal is Mosaic's biggest international investment to date.
Staff writer Evan Ramstad contributed to this report.
Mike Hughlett • 612-673-7003
