Vale Grows Fertilizer Business in Brazil

Following its acquisition of potash assets in Argentina a year ago and a failed attempt to acquire US-based fertilizer specialist Mosaic, Vale has secured 2 sets of Brazil-based downstream fertilizer producers in a deal that may be worth up to $5.6bn. It plans to acquire 100.0% of Bunge’s phosphate unit BPI for $1.65bn and 42.3% of the equity in BM&FBovespa-listed Fosfertil for $2.15bn. However, Vale says it hopes to acquire 100% of Fosfertil’s shares, which could elevate the price to $5.6bn, according to an estimate by Itau. Vale says it has the cash to pay for the purchase. CEO Roger Agnelli says the deals are part of Vale’s the company’s strategy to build its fertilizer business, which will be based in Brazil. The emphasis on domestic location appears to contradict the company’s earlier strategy, which involved a failed move last year to acquire overseas giant Mosaic. That attempt that was derailed by what people close to the process describe as political interference by the government. “We view this deal as positive for Vale because it: i) represents diversification for the company; ii) creates interesting growth opportunities in the fertilizer segment in Brazil; and iii) generates potential synergies between Vale and Bunge’s fertilizer assets,” says Itau. It adds that Vale still needs to decide how it will organize fertilizer assets once the acquisition is concluded. One option is to delist Fosfertil after it gets the shares. Another is to keep it listed and bring all other fertilizer assets under the roof of Fosfertil. Bunge hired Credit Suisse for advice on its sale of assets while Vale apparently did not appoint advisors.