PhosAgro IPO Should Use Cash to Buy Mosaic

Includes: MOS
by: Emerging Money

OAO PhosAgro, one of the world’s largest maker of phosphate fertilizers intends to sell a 10 percent to 15 percent stake in the company in an initial public offering in London and Moscow.

The Russian company hopes to raise $500 million from the float. Executives said the proceeds could be used for potential M&A but did not mention any specific names. "We are not considering global M&A currently," Chief Executive Officer Maxim Volkov said. "In the future we will look at possibilities to raise PhosAgro’s value."

Why not Mosaic (NYSE:MOS)?

Demand in the fertilizer sector continues to grow along with the emerging consumer food theme. Typically summer sees a drop in demand, but the demand for fertilizer remains steady.

There have been a number of companies in Russia that have planned IPOs this year, but only four have gone through with those plans and at least seven have postponed due to poor pricing. PhosAgro has a healthy balance sheet and is not desperate for cash, so canceling if there is a lack of demand is always possible.

Investors in Russian may purchase existing ordinary shares while foreign investors can purchase Global Depositary Receipts.