Acquisitions Drive Minerals Stocks Today

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Stocks are mixed today as investors prepare for another busy earnings week. The one significant economic report came from the National Association of Realtors, which said pending home sales fell 5.6% sequentially last month, or 1.2% year over year. Higher prices and mortgage rates were blamed for the drop, an early sign that home sales will be volatile as interest rates rise. Overall, the markets handled the news well, and the Dow Jones Industrial Average (DJINDICES: ^DJI  ) is down a negligible five points late in trading.  

In the energy and materials market, the day was dominated by asset sales. Consol Energy (NYSE: CNX  ) said it is selling five coal mines to privately held Murray Energy for $850 million in cash, $184 million in future payments, and the relief of $2.4 billion in liabilities. Consol is trying to move its focus to natural gas and reduce exposure to coal. Natural gas has fallen in cost to a level that makes it cheaper to produce electricity from the gas. Environmental regulations haven't helped, and Consol thinks it has a better future with natural gas. 

Fertilizer company Mosaic (NYSE: MOS  ) announced today that it's buying CF Industries' (NYSE: CF  ) phosphate business for $1.4 billion, $200 million of which will go to an escrow account CF Industries maintains for environmental obligations. The deal is expected to close early next year, and Mosaic's management says it will add about $0.30 per share in earnings next year. 

This looks like an acquisition for growth on the surface, but a major driver was the location of one of CF Industries' processing plants, which is near a Mosaic mine in Florida. The acquisition will allow Mosaic to save $500 million it would have spent building its own plant. The deal will also give Mosaic greater scale and more than 10% of the global phosphate market -- something it hopes will help it grow in emerging markets such as Brazil.  

These are both largely strategic deals, as opposed to attempts to capture emerging-market growth. Consol Energy and Mosaic are hoping to make operations more efficient, which should still serve shareholders' long-term interests.

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Related Tickers

9/23/2016 4:55 PM
^DJI $18261.45 Down -131.01 -0.71%
CF $22.63 Down -0.60 -2.58%
CF Industries Hold… CAPS Rating: ****
CNX $17.40 Down -0.17 -0.97%
CONSOL Energy CAPS Rating: ***
MOS $24.82 Down -0.73 -2.86%
Mosaic CAPS Rating: ****