July 16 (Bloomberg) -- Mosaic Co., North America’s second- largest fertilizer producer, rose the most in eight months in New York after a Brazilian newspaper reported that Vale SA is preparing a $25 billion bid for the company. Vale shares fell.

Mosaic jumped 12 percent to $49.98 on the New York Stock Exchange. Vale, the world’s biggest iron-ore miner, fell 0.2 percent to $18.04. Vale’s Brazilian shares declined 0.2 percent to 30.10 reais.

A five-year rally that has pushed prices of potash, a raw material used to make fertilizers, up more than 300 percent has fueled speculation that Mosaic would be acquired. O Estado de S. Paulo reported, without saying how it obtained the information, that Vale and BHP Billiton Ltd. are both interested in purchasing the company.

“Potash producers are very attractive given the growth outlook for emerging markets like China and India,” said James O’Leary, portfolio manager for the Touchstone International Growth Fund, part of Reno, Nevada-based Navellier & Associates, which manages $3 billion. “It’s also good for Vale because it diversifies the company,” said O’Leary, who owns shares of Vale, BHP and Potash Corp. of Saskatchewan.

Fernando Thompson, a spokesman for Rio de Janeiro-based Vale, said the company doesn’t comment on market speculation. Linda Thrasher, a spokeswoman for Plymouth, Minnesota-based Mosaic, and Lisa Clemens, a spokeswoman for Cargill Inc., which owns about 64 percent of Mosaic, both declined to comment.

Buyout Targets

“We wouldn’t comment on speculation or market rumor,” BHP’s London-based spokesman Illtud Harri said in an e-mail response when asked for comment.

Melbourne-based BHP said in February it may expand its investments in potash. Vale agreed in January to pay Rio Tinto Group $850 million for potash projects in Argentina and Canada.

Companies including Mosaic and Potash Corp., the world’s largest producer of its namesake crop nutrient, are attractive buyout targets because they have existing mines, Terence Ortslan, a mining analyst at TSO & Associates in Montreal, said in an interview last month.

Mosaic is the world’s largest maker of finished phosphate products and the second-largest producer of potash by capacity, according to the company’s Web site. It has three potash mines in Saskatchewan, one in New Mexico and another in Michigan. Potash is a form of potassium, a primary agricultural nutrient with phosphorus and nitrogen.

U.S. trading of bullish Mosaic options jumped to a record on July 10 amid acquisition speculation that the fertilizer producer may be acquired. Mosaic has risen 43 percent this year.

Surprise Move

“I would be surprised if Vale acquires Mosaic,” said Rodney Melhados, an analyst at Sao Paulo-based Planner Corretora de Valores. “It is financially possible, but it doesn’t seem to be rational for the company. At this moment, I think Vale is more inclined to make acquisitions of coal assets.”

Vale denied last month it was planning an acquisition after Anglo American Plc’s board unanimously rejected a proposal from Xstrata Plc for a “merger of equals” to create a mining company that would compete with BHP. Vale’s negotiations to acquire Zug, Switzerland-based Xstrata broke down in April 2008.

Any takeover talk is “market speculation,” Chief Executive Officer Roger Agnelli said on June 25.

“If a deal gets done, it’s a pure diversification attempt by Vale to reduce its reliance on one business -- iron ore,” Jacob Doft, who helps manage $1.6 billion as chief executive officer Highline Capital Management in New York. “It’s all about diversification.”

Vale generated 43 percent of sales last year from iron ore mining, according to Bloomberg data.

Bond Offer

A $1 billion convertible bond offer announced by Vale on July 6 further fueled speculation that the miner might acquire a rival in order to compete for access to resources when commodity demand rebounds.

“Potash, along with coal and copper, is part of Vale’s M&A/growth plan,” Itau Unibanco Holding SA analysts wrote in a note to clients today. “Vale sees Potash as the new iron ore.”

Vale raised 19.4 billion reais ($10 billion) in Brazil’s largest-ever share offering in July 2008. At the time, Agnelli said the proceeds would be used to fund acquisitions and expand existing operations.

To contact the reporters on this story: Christopher Donville in Vancouver at cjdonville@bloomberg.net. Helder Marinho at hmarinho@bloomberg.net.

Last Updated: July 16, 2009 16:41 EDT