Mosaic Co. told investors Monday that it expects to have $5 billion available to buy back stock and fund other needs at a time when millions of restricted shares are about to enter the market.
On May 26, Cargill family charitable trusts will be able to start selling shares they have held since the Minnetonka-based agribusiness giant spun off Mosaic two years ago.
There has been speculation that the release of the shares could create an opportunity for a competitor to acquire Mosaic, the world's largest producer of phosphate crop nutrients.
But executives said Monday that the company will be in a strong position to buy shares back itself. Chief Financial Officer Larry Stranghoener said the Plymouth-based company has $5 billion in "surplus cash and debt capacity."
"We have built our current financial capacity in large part in contemplation of [the Cargill transaction] and are well prepared to address opportunities that may arise after May 26," Stranghoener said on a conference call with analysts.
Cargill shed its 64 percent stake in Mosaic in 2011 in a transaction partly designed to free up cash for philanthropies founded by Margaret A. Cargill, the late granddaughter of the company's founder.
About 129 million shares were allotted to trusts held by those philanthropies, and a third of them can be sold beginning on May 26.
Mosaic stock closed at $61.30 Monday, down $1.98 per share, or about 3.1 percent.
Mosaic's valuation relative to profit is 23 percent cheaper than that of its closest rival, Potash Corp. of Saskatchewan Inc., according to a Bloomberg analysis.
Stranghoener said Mosaic is assessing its ability to buy back shares while seizing growth opportunities and maintaining a solid credit rating.
"We've got $5 billion of surplus cash and currently available debt capacity to be used for share repurchases, to be used to fund an escrow account for asset retirement obligations, and possibly to be used for strategic opportunities," he said. "We're not committing at this point in time to using all of that amount for share repurchases — we'll see what the opportunities are."
Some investors believe Mosaic hasn't distributed enough cash to its stockholders, according to Malcolm Polley, chief investment officer at Stewart Capital Advisors.
The company indicated Monday that the $5 billion of cash would be available over the next 12 to 24 months, and would be used primarily for share repurchases or for partly absorbing the shares from the Cargill family trusts, said Goldman Sachs analyst Christopher Parkinson.
Goldman Sachs Inc. maintains a buy rating on Mosaic stock, and Parkinson said the $5 billion amount was in line with his expectations.
Bloomberg News contributed to this report.