UPDATE 2-Mosaic to buy CF’s phosphate business for $1.2 billion – by Rod Nickel (Reuters U.S. – October 28, 2013)

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Oct 28 (Reuters) – Mosaic Co said on Monday that it would buy the phosphate business of fellow U.S. fertilizer producer CF Industries Holdings Inc for $1.2 billion in cash, in a deal that bolsters each company’s core business.

The deal signals Illinois-based CF’s increased focus on its core nitrogen fertilizer products and comes after Mosaic has said it was looking to increase its production of phosphate, one of three critical crop nutrients.

Shares of CF, the largest U.S. nitrogen producer, was up 3.8 percent at $217.62 in midday New York Stock Exchange trading, while Mosaic, the world’s biggest producer of finished phosphate products, rose 0.2 percent to $46.02.

Minnesota-based Mosaic will acquire the South Pasture phosphate mine and plant, a phosphate manufacturing plant and ammonia terminal and warehouse facilities, all of which are in Florida.

The facilities produce about 1.8 million tonnes of phosphate fertilizer per year, topping up the annual 8.2 million tonnes produced by Mosaic and adding about 30 cents per share to its 2015 earnings, the company said. It expects the deal to close in the first half of 2014.

CF will also supply Mosaic with 1 million tonnes a year of ammonia, a nitrogen product used in making finished phosphate products.

This will allow Mosaic to scrap its plans to build a $1.1 billion ammonia manufacturing plant in Faustina, Louisiana.

The company is also canceling a $1 billion phosphate processing plant at Ona, Florida. The $2.1 billion in savings will offset Mosaic’s total $2.1 billion in planned spending on the CF deal and related investments.

Since the supply agreement allows Mosaic to cancel two major capital projects even as it bulks up its phosphate business, Mosaic maintains flexibility to buy back stock later this year, Chief Financial Officer Larry Stranghoener said on a conference call.

“This is a perfect strategic fit for us,” Stranghoener said, adding that the deal allows the company to meet demand in North America and South America for phosphate.

Mosaic said it would commit $200 million to cover the closure and long-term care of phosphogypsum stacks, a radioactive by-product of phosphate production, under CF’s current Florida operations.

Mosaic also expects to spend $500 million to develop reserves and improve existing phosphate mines, plus $200 million on marine assets to transport ammonia from Louisiana to its Florida facilities.

For CF, the ammonia supply deal with Mosaic strengthens its confidence in the return on its investment at its Donaldsonville, Louisiana, nitrogen complex, CF Chief Executive Steve Wilson said in a statement. CF is in the midst of a $3.8-billion expansion of that complex and one in Iowa.

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