October 29, 2013

 

Mosaic to buy phosphate business of CF Industries for US$1.2 billion

 

 


The Mosaic Company has signed a definitive agreement to acquire the phosphate business of CF Industries, Inc. for US$1.2 billion in cash plus US$200 million to fund CF Industries' asset retirement obligation escrow.

 

Under the terms of the agreement, Mosaic would acquire the 22,000-acre South Pasture phosphate mine and beneficiation plant in Hardee County, Florida, a phosphate manufacturing facility in Plant City, Florida, and ammonia terminal and finished product warehouse facilities in Tampa. The CF Industries' facilities currently produce approximately 1.8 million tonnes of phosphate fertilizer/year, which would be additive to the annual 8.2 million tonnes currently produced by Mosaic. 


The acquisition is expected to add approximately US$0.30/share to Mosaic's 2015 earnings/share, excluding any debt financing costs and any changes to outstanding share count.


The proximity of CF Industries' South Pasture mine to Mosaic's planned Ona phosphate mine in Hardee County would allow Mosaic to take advantage of the synergies associated with the combined mining assets. The existing infrastructure at South Pasture would result in Mosaic saving approximately US$500 million by not having to construct a US$1 billion beneficiation plant. Mosaic would instead invest approximately US$500 million to develop phosphate rock reserves and improve existing mines.


Mosaic and CF Industries also signed strategic supply agreements under which CF Industries will provide Mosaic with up to approximately 1.0 million tonnes/year of ammonia.  Under one agreement, Mosaic will purchase up to 725,000 tonnes annually for 15 years with pricing based on a formula tied to the prevailing price of US natural gas.  This agreement is expected to commence prior to January 2017.  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. In light of these supply arrangements, Mosaic has decided to forego its proposed ammonia manufacturing plant at its Faustina, Louisiana phosphate facility, saving approximately US$1.1 billion in future capital expenditures.


"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 Chief Executive Officer James T. Prokopanko.  


The phosphate acquisition would be additive to Mosaic's existing Florida operations, and complements the company's plans to mine phosphate rock reserves in Hardee and Desoto counties and extensions of the existing Wingate mine.


In total, the transactions are expected to favourably impact Mosaic's future capital expenditures. In addition to the US$1.4 billion total consideration in connection with the acquisition of CF Industries' phosphate business, Mosaic expects to spend an estimated US$500 million to develop reserves and improve existing mines, and an estimated US$200 million on marine assets to transport ammonia from Louisiana to its Florida facilities. The estimated US$2.1 billion of investments and capital expenditures is expected to be offset by an estimated US$2.1 billion in capital savings related to the cancellations of the Faustina ammonia project and the planned Ona beneficiation facility. Mosaic also expects to capture significant additional operating efficiencies.


Under terms of the agreement, as part of the US$1.4 billion total consideration, Mosaic would replace CF Industries' US$200 million of escrowed financial assurance earmarked for closure and long-term care of phosphogypsum stacks under CF Industries' operation in Florida. The transaction is expected to close in the first half of calendar 2014 and is not expected to impact Mosaic's shareholder distribution plans. Customary regulatory approvals are required.


The Mosaic Company is one of the world's leading producers and marketers of concentrated phosphate and potash crop nutrients. Mosaic is a single source provider of phosphate and potash fertilisers and feed ingredients for the global agriculture industry.

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