Already the world's largest producer of finished phosphate, a key component in fertilizer utilized by the agricultural industry, Mosaic (NYSE:MOS) has signed a definitive agreement to acquire several phosphate operations and assets from CF Industries (NYSE:CF), Mosaic announced today. The assets, Mosaic said, produce 1.8 million tonnes (metric tons) of phosphate fertilizer, bringing Mosaic's total annual production to 10 million tonnes.
The total value of the deal is $1.4 billion, which includes $1.2 billion in cash, in addition to funding CF Industries' retirement fund of approximately $200 million, according to Mosaic. The assets included in the acquisition include a phosphate mine and plant in Hardee, Fla., a facility in Plant City, Fla., and a terminal and warehouse in Tampa.
The deal with CF Industries should result in as much as $500 million in savings as Mosaic continues its plans to open its Ona phosphate operations, also located in Hardee, according to Mosaic.
In a separate transaction, Mosaic has entered into an agreement with CF Industries in which Mosaic will purchase as much as 1 million tonnes of ammonia, meaning Mosaic can scrap plans to build its own ammonia manufacturing facility. The ammonia deal, Mosaic said, should save it as much as $1.1 billion in future capital expenses.
Commenting on the deal, Mosaic President and CEO James Prokopanko said, "The addition of these new phosphate assets and securing access to long-term ammonia supplies solidifies Mosaic's position among the largest and best phosphate producers in the world."
Mosaic expects the acquisition to close in the first half of 2014, subject to standard closing conditions, and will add $0.30 per share in earnings for its 2015 fiscal year.
Fool contributor Tim Brugger has no position in any stocks mentioned. The Motley Fool owns shares of CF Industries Holdings. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.