Mosaic Scoops Up Archer Daniels' Fertilizer Biz - Analyst Blog

Fertilizer maker Mosaic MOS has cut a definitive deal to buy Archer Daniels Midland Company's ADM fertilizer distribution business in Brazil and Paraguay for $350 million. The acquisition is subject to regulatory clearances and the purchase price assumes the delivery of $150 million in working capital at deal closure.

Under the deal terms, Mosaic will purchase four blending and warehousing facilities in Brazil, one in Paraguay and additional warehousing and logistics service capabilities. The company has also agreed to supply Archer Daniels' fertilizer needs in Brazil and Paraguay under five-year supply agreements.

Mosaic said that it will finance the takeover with its cash from operations. The deal is not expected to affect the company's shareholder distribution plans.

Mosaic's shares closed at $48.37 yesterday, gaining around 2%. The stock is down roughly 17% over a year.  

This acquisition of the fertilizer distribution business is expected to accelerate Mosaic's existing growth plans in Brazil and replace a considerable amount of planned internal investments in this major market.

The buyout will expand Mosaic's annual distribution capability in one of the world's rapidly growing agricultural regions to around 6 million metric tons of crop nutrients from roughly 4 million metric tons. In addition to expanding the company's market access, it offers a critical distribution platform in the region.

The acquisition also complements Mosaic's recent strategic initiatives including its purchase of CF Industries' CF phosphate business, joint venture with Ma'aden and SABIC in Saudi Arabia and potash capacity expansion projects.

Mosaic, last month, wrapped up its takeover of CF Industries' phosphate business for $1.4 billion. The assets acquired by the company currently produce roughly 1.8 million tons of phosphate fertilizer per year.

The acquisition expands Mosaic's phosphate business and production capacity of the nutrient in Florida. It also complements the company's plans to mine phosphate rock reserves in Hardee and Desoto counties and expansions of the existing Wingate mine. The acquisition will bring Mosaic's annual phosphates capacity to more than 11 million tons.

Mosaic is a Zacks Rank #3 (Hold) stock.

Another big player in the fertilizer industry – Potash Corp. POT –  currently holds a Zacks Rank #2 (Buy).