The Mosaic Co to buy CF Industries' phosphate business for $1.2 bn

The Mosaic Co, the world's second-largest fertilizer company, yesterday said that it would buy the phosphate business of its US peer CF Industries Holdings Inc, for $1.2 billion in cash, in a bid to expand its core business.

The deal will help both companies, with Mosaic Co increasing its phosphate production, while CF Industries will now be free to focus on its core nitrogen fertilizer business.

The transaction will give Minnesota-based Mosaic Co the 22,000-acre South Pasture phosphate mine and beneficiation plant, a phosphate manufacturing facility, and ammonia terminal and finished product warehouse facilities, all located in Florida.

These facilities currently produce approximately 1.8 million tonnes of phosphate fertilizer per year, which would add to the annual 8.2 million tonnes currently produced by Mosaic. 

Mosaic Co is assuming liabilities related to the phosphate business, including the responsibility for closure, long-term maintenance and monitoring of the phosphogypsum stacks at the Plant City and Bartow complexes.

Mosaic Co will pay $1.2 billion in cash, plus $200 million to fund an escrow account CF Industries maintains for certain environmental obligations related to its Florida facilities. 

Mosaic Co said that the proximity of CF Industries' South Pasture mine to its own planned Ona phosphate mine in Hardee County would allow it to take advantage of the synergies associated with the combined mining assets.

The existing infrastructure at South Pasture would result in Mosaic saving approximately $500 million by not having to construct a $1 billion beneficiation plant.

Mosaic would instead invest approximately $500 million to develop phosphate rock reserves and improve existing mines.

Mosaic and CF Industries also signed supply agreements under which CF Industries will provide Mosaic with up to approximately 1 million tonnes per year of ammonia. 

Under one agreement, Mosaic will buy up to 725,000 tonnes annually for 15 years from January 2017 with pricing based on a formula tied to the prevailing price of US natural gas.

Under a second agreement, Mosaic will purchase approximately 270,000 tonnes annually for three years from CF Industries' Trinidad operations at CFR Tampa market-based pricing.

Due to these supply agreements, Mosaic has decided to scrap building a proposed ammonia manufacturing plant at its Faustina, Louisiana phosphate facility, saving around $1.1 billion in future capital expenditures.

This is a set of agreements with significant strategic value to both CF Industries and Mosaic," said Stephen Wilson, chairman and CEO of Illinois-based CF Industries. "The sale of our phosphate operations represents good value for our shareholders and the full set of transactions enables us to sharpen the strategic focus on our nitrogen business."

"Uniting CF Industries' phosphate operations with Mosaic's creates an ideal combination that provides the opportunity for enhanced operating efficiencies and sustainability efforts, lower production costs and reduced capital investment-creating value for our shareholders, customers and employees," said Mosaic president and CEO, James Prokopanko.

Mosaic is the world's largest producer of phosphate and second-largest producer of potash, the two crop nutrients required for producing fertilizer, which is used to boost crop growth and protect plants from diseases.

Mosaic along with Canada's PotashCorp and Agrium are part of Canpotex, a potash export cartel.