Mosaic to Buy CF Phosphate Fertilizer Unit for $1.2 Billion

Mosaic Co., the world’s largest phosphate-fertilizer producer, agreed to acquire a mine and other assets from CF Industries Inc. for $1.2 billion to boost its output of the crop nutrient in Florida.

Mosaic will also pay $200 million to fund CF’s asset retirement obligation escrow, Plymouth, Minnesota-based Mosaic said in a statement today. Mosaic said the transaction will add about 30 cents a share to 2015 earnings, excluding any debt financing costs and increase in the number of the company’s shares.

“This deal will allow us to grow the top line of our phosphates business and grow the value of that business,” Larry Stranghoener, Mosaic’s chief financial officer, said today by telephone. The transaction “is a deal that makes as much strategic sense as any deal I’ve seen in my career.”

The transaction will give Mosaic the 22,000-acre (8,903-hectare) South Pasture phosphate mine and beneficiation plant, a factory in Plant City, and an ammonia terminal and finished-product warehouse facilities in Tampa. Mosaic said it will save about $500 million because the deal means it will no longer have to build a processing plant for its new Ona mine, which like CF’s South Pasture mine is located in Florida’s Hardee County.

“We view ourselves as the natural parent of this business,” Stranghoener said. “The CF property is literally the hole in the middle of the donut” in relation to Mosaic’s nearby operations.

Cargill Shares

Mosaic said it expects the deal to be financed with cash and debt and to close in the first half of next year. It’s not expected to affect the plans to step up shareholder distributions, including the possible purchase of shares held by members of Cargill Inc.’s founding family and charitable trusts.

“The plan is that we look forward to the end of November at which time we no longer have any contractual restrictions on our ability to buy back shares,” Stranghoener said. “We look forward to using our balance sheet.”

CF, based in Deerfield, Illinois, is North America’s largest producer of nitrogen-based fertilizer.

Mosaic rose 1.6 percent to $46.67 at the close in New York. CF climbed 4.2 percent to $218.36.

CF, under pressure from activist investor Dan Loeb’s Third Point LLC hedge to improve investor returns, said Oct. 17 in a statement it would increase its quarterly dividend by 150 percent to $1 a share from 40 cents.

‘Made Sense’

Stephen Wilson is stepping down as chief executive officer effective Jan. 1., the company said in a Sept. 16 statement. Wilson, who remains chairman, will be succeeded by W. Anthony Will, currently CF’s senior vice president of manufacturing and distribution.

“Both sides came to the conclusion that it made sense for CF to focus on nitrogen and for Mosaic to focus on phosphate,” said Stranghoener, who said the companies have held informal discussions over about two years.

The CF assets currently produce about 1.8 million metric tons a year of phosphate fertilizer, while Mosaic produces 8.2 million tons, according to the statement.

Dorsey & Whitney LLP provided legal advice to Mosaic on the transaction, with Mayer Brown LLP and Arnold & Porter LLP advising in specialist capacities, Mosaic said in the statement.

Mosaic didn’t engage an investment bank in the deal, Stranghoener said in the interview.

Rothschild Inc. provided a fairness opinion on the transaction to CF, the company said in a statement. Skadden, Arps, Slate, Meagher & Flom LLP served as legal counsel.

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