Cargill to shed stake in Mosaic

Saskatchewan’s potash assets are again the talk of the market as U.S. agrifood giant Cargill moves to divest its stake in the owner of the province’s biggest potash mine.

Privately-held Cargill announced Tuesday it will distribute its 64 per cent stake in The Mosaic Co. to Cargill shareholders and debtholders. Mosaic’s closing share price Tuesday of $85.07 would put the total value of Cargill’s 286 million shares in the fertilizer firm at about $24.33 billion (all figures US$).

“The transaction will accomplish a number of important business objectives for both Cargill and Mosaic and is in the best interests of both companies,” Cargill CEO Greg Page said in a release.

For Cargill, that means hanging onto its well-entrenched status as a privately-held company. But it also helps meet the diversification and distribution needs of the charitable trusts and foundation set up in the estate planning of one of Cargill’s largest shareholders, Margaret Cargill, who died in 2006.

The sale “also will enhance Cargill’s credit profile and ensure that the company’s financial results, compensation plans and management focus are fully aligned with the performance of the businesses Cargill directly manages,” the company said.

Minneapolis-based Mosaic, meanwhile, can expect to improve its “long-term strategic and financial flexibility,” but will also “greatly” increase the liquidity of its common stock.

“Going forward, we will be better positioned to capitalize on the positive outlook for our industry, retain our market leading positions and reinforce our existing competitive advantages,” Mosaic CEO Jim Prokopanko said in the same release.

“Importantly, there will be no adverse impact to our earnings potential, strong balance sheet or ability to generate cash.”

The sale terms call for Cargill to swap about 179 million of its 286 million Mosaic shares with Cargill’s private stockholders, including Margaret Cargill’s charitable trusts, for some of all of their Cargill stock. Cargill’s remaining 107 million Mosaic shares would be doled out in exchange for Cargill debt owned by third parties.

On completion, Mosaic shares held by the charitable trusts and Cargill stockholders taking part in this exchange would represent about 40 per cent of Mosaic’s total shares and at least 81 per cent of the vote in electing Mosaic’s board of directors.

Cargill said it expects to close these deals in its second calendar quarter this year.

The Mosaic shares going to the trusts and other Cargill shareholders will generally be considered non-transferable for the first two and a half years after a successful closing of this split-off.

The transfer restrictions on the Mosaic shares would be released, and the shares would become transferable, in three equal annual installments starting on the two-and-a-half-year anniversary of the split-off.

As financial markets digested Cargill’s news Tuesday night, observers predicted that when the Cargill stake becomes fully transferable, global mining giants such as BHP Billiton or Vale may well line up with takeover bids for Mosaic’s mining assets.

Regina plans

Mosaic’s potash mines include the world’s largest at Esterhazy, Sask., as well as mines at Belle Plaine and Colonsay, Sask. and in Michigan and New Mexico, with a total annual capacity of 10.4 million tonnes.

Its capacity is the second-largest in the world behind Saskatoon-based PotashCorp, for which BHP Billiton mounted an unsuccessful takeover bid in 2010.

Mosaic expects to boost its potash capacity to about 17 million tonnes through several expansion projects to be completed by 2020.

The company’s production in fiscal 2010 accounted for about 12 per cent of global potash production and nearly 38 per cent of North American production.

Mosaic is also the world’s biggest producer of finished phosphate products, with capacity of 10.3 million tonnes per year, mostly from facilities in Florida and Louisiana.

Its distribution network also includes blending and bagging operations, port facilities and distribution points in several countries, most notably in growth areas for its fertilizer business such as Brazil, India, China and Argentina.

Mosaic’s ties to Cargill were formed when the fertilizer company was created in 2004 through the combination of Cargill’s fertilizer business with IMC Global, in which Cargill got its 64 per cent stake of the combined firm.

Mosaic’s logo is already writ large in Saskatchewan’s capital, Regina, following a 10-year naming rights deal in 2006 on the home field of the CFL’s Saskatchewan Roughriders, Taylor Field, now dubbed Mosaic Stadium.

But the company also announced in August 2010 that it would set up headquarters for its potash operations in Regina, bringing 120 head office jobs to that city and becoming the anchor tenant in a new downtown office tower at 12th Avenue and Hamilton Street.

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