Yara International ASA (YAR), a maker of ammonia, nitrates and specialty fertilizers, agreed to buy 60 percent of phosphate producer Brazil’s Galvani Industria Comercio e Servicos SA to expand further in South America.
Yara bought the stake for an “enterprise value” of $318 million made up of $132 million for current business and $186 million for mining and production projects, the Oslo-based company said today in a statement. Yara will also inject $165 million of equity, dependent on “certain conditions.”
“The Galvani acquisition will help secure phosphate fertilizer capacity in the center of the country and in the attractive and fast growing agri frontiers of Brazil,” Chief Executive Officer Joergen Ole Haslestad said in the statement.
Yara plans to expand its so-called upstream operations in South America to boost margins and take advantage of rising food prices. It bought Bunge Ltd.’s operations in Brazil for $750 million in December 2012 and OFD Holding Inc. from Omimex Resources Inc. for $425 million in November last year.
While most of Yara’s global operations focus on nitrogen-based products, phosphate is crucial for Brazil’s soybean industry, Lair Hanzen, the head of Yara in Brazil, said by phone. “We’re moving from what our core business is in other parts of the world because soy needs almost no nitrogen and it’s very important in Brazil.”
Yara produces 1 million metric tons of phosphate-based fertilizers in Brazil, which accounts for about 10 percent of Brazil’s production. That’s an amount similar to Galvani’s.
Galvani owns industrial sites at Paulinia and Luis Eduardo Magalhaes and two phosphate rock mines at Lagamar and Angico dos Dias, according to the statement. Yara will commit to supporting development of three mining and production projects with total capital expenditure of $920 million until 2019 provided certain conditions are met. Its share of the capex will be $552 million.
Mining projects will increase fivefold Galvani’s phosphate rock output capacity, Chairman Rodolfo Galvani Jr. said. The company will continue to supply other fertilizer companies.
“Galvani will remain independent and focusing on maximizing profit,” he said.