Mosaic on the Block?

It doesn't take a fertile imagination to picture one of the world's leading mining conglomerates taking over a potash and phosphate producer like Mosaic (NYSE: MOS  ) or PotashCorp (NYSE: POT  ) .

Now that a Brazilian report has suggested that Vale (NYSE: VALE  ) is prepping a $25 billion bid for former fertilizer champ Mosaic, speculation is running wild. The potash potentate's shares were up more than 10% this morning.

We've already seen Vale scoop up Rio Tinto's (NYSE: RTP  ) undeveloped potash assets for a cool $850 million earlier this year. That action mirrored BHP Billiton's consolidation of a stake in a massive Saskatchewan potash property last year. These two clearly have the fertilizer fever.

This demonstrated appetite makes the rumors -- and I should note that BHP was said to be sniffing around PotashCorp earlier this year -- at least somewhat credible. Bolstering that believability is the argument that it's far more economical to expand existing potash production than to develop new assets from scratch.

The main problem for Vale, I think, would be to convince Mosaic shareholders to part with their shares, which sit nearly $100 shy of their 52-week high. That price looks admittedly bubbly in hindsight, but the anchoring effect is still difficult to shake. Just look at Agrium's (NYSE: AGU  ) difficulty in scooping CF Industries (NYSE: CF  ) at an opportunistic price. Ditto for CF's tango with Terra Industries (NYSE: TRA  ) .

Compounding this issue is the ownership structure of Mosaic. The company, which spun off Compass Minerals a few years back, is itself a spinoff of privately held Cargill. The Big Ag behemoth still holds nearly two-thirds of Mosaic's outstanding shares. As a long-term owner without a public shareholder base, I would argue that Cargill is far less focused on Mosaic's quoted market value, and will be very reluctant to let go of this world-class asset.