- Mosaic (MOS -4.6%) and Vale (VALE -3.5%) are both trading lower after the ag giant buys most of the fertilizer chemicals business of the Brazilian miner in a cash and stock deal valued at $2.5B.
- MOS will pay for the deal with $1.25B in cash, which it plans to raise through debt, and 42.3M newly issued common shares, or a ~11% stake in the company.
- Rumors had swirled for months that MOS could buy Vale's fertilizer business, with some reports speculating a $3B price tag.
- Analysts at Banco BTG Pactual estimate MOS is paying 8.6x the fertilizer division's EBITDA, which they say is "an attractive multiple for Vale."
- Brazil already is MOS's largest international market, generating $2.14B in net sales in 2015, or 24% of the company's total for the year.
- Vale says it will retain its nitrogen and phosphate fertilizer assets in Cubatão, Brazil, which generated $108M in cash flow during 2015, but it expects to sell them in 2017.
- Vale has been selling assets to help meet a $10B debt reduction target by next year.