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Cargill puts potash assets into play Add to ...

Agribusiness giant Cargill Inc. is spinning off its majority stake in fertilizer producer Mosaic setting the stage for another potential takeover battle over prized Saskatchewan potash reserves.

In a complicated transaction valued at more than $24-billion (U.S.), privately-held Cargill will distribute its 64-per-cent interest in Plymouth, Minn.-based Mosaic to its shareholders, who will then be free to sell their Mosaic shares on the public market or to private buyers. The entire process could take more than a year to complete.

The result would leave Mosaic, whose three potash production facilities in Saskatchewan are the crown jewels of the company's operations, without a majority shareholder.

The publicly-traded company, whose market value is about $38-billion, would then vulnerable to a takeover bid from an international mining company or other buyer seeking to cash in on rising potash prices, which are being driven by heavy fertilizer demand for from countries such as China, India and Brazil.

Mosaic would certainly be an attractive target. It has more than $3-billion in cash and is one of the world's largest producers of potash and phosphates, two key ingredients in fertilizer. It also owns one-third of Canpotex Ltd., a Canadian-based company that markets Saskatchewan's potash overseas.

The other owners are Potash Corp. of Saskatchewan Ltd., the world's largest potash producer and the subject of an unsuccessful takeover bid last year by Australia's BHP Billiton Ltd., and Agrium Inc. of Calgary.

Jim Prokopanko, Mosaic's chief executive officer and the chairman of Canpotex, acknowledged on a conference call last night that the company could now be a takeover target. "Yes, it's possible for Mosaic to be acquired," he said.

Sources familiar with the matter have said that Brazilian iron ore producer Vale SA expressed an interest in acquiring Mosaic in 2009. BHP Billiton could also be a potential suitor, considering its interest in acquiring long-life potash assets in Saskatchewan.

It's not clear if Cargill seriously considered any offers for Mosaic before going ahead with the spinoff plan. Mr. Prokopanko said Cargill had been considering several alternatives for its holding in Mosaic for some time. He did not provide further details.

The move by Cargill, a behemoth in the global agriculture business and one of the most secretive corporations in the United States, follows the Canadian government's rejection in November of BHP's $38.6-billion hostile takeover offer for Potash Corp. Ottawa's surprise decision followed extreme opposition to the proposed takeover from the government of Saskatchewan and Premier Brad Wall, who feared the sale would reduce provincial revenues.

The high-profile takeover battle vaulted the operations of Canpotex into the centre of the public debate surrounding the hostile bid. BHP initially indicated it planned to remove Potash Corp. from the organization, which it called a cartel, if it was successful with its offer. Although BHP later retreated from that position, the potential dismantling of Canpotex was a major reason BHP failed to win support from Saskatchewan.

Mosaic Corp.'s Saskatchewan potash assets could now become a key focus for any potential acquirers. If a company like Vale or BHP were to launch a takeover bid for Mosaic, it is unclear if Investment Canada, which oversees major foreign acquisitions of Canadian companies, would have jurisdiction over such an offer, since Mosaic is not based in Canada. However, considering the Saskatchewan government's role in the Potash Corp. matter, the province would likely seek to have a voice in any potential transaction.

Saskatchewan is where Mosaic derives a considerable amount of its corporate profit. While only 29 per cent of the company's revenues were from potash in 2010, 73 per cent of its operating earnings came from production of the mineral. The bulk of Mosaic's potash comes from its Canadian mines.

BHP Billiton spokesman Ruban Yogarajah said the company had no comment on Cargill's spinoff of its Mosaic stake.

Tuesday's transaction appears to have been sparked by the death of Margaret Cargill in 2006. Ms. Cargill was the granddaughter of William W. Cargill, who founded the company in 1865. She never worked at Cargill, never married but was one of Cargill's largest shareholders. She spent most of her time on charitable activities and set up a charitable foundation which has about $2-billion in assets, including more than 100 million Mosaic shares. The foundation will now sell those shares as part of the transaction. Several other Cargill shareholders are also expected to sell their Mosaic shares.

Mr. Prokopanko also said Mosaic has considered listing its shares in Toronto and that is still under consideration. "We have on a couple of occasions considered a TSX listing," he said on the conference call. "We are not contemplating moving forward on that as a result of this transaction. It's a matter that we continue to assess."

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MOS-N Mosaic Company 46.11 -1.07
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