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The Deal: Mosaic Picks-up CF Industries' Phosphate Business. Shares Rise

NEW YORK ( TheStreet) --  Mosaic (MOS - Get Report) said Monday it would acquire the phosphate business of rival CF Industries Holdings (CF - Get Report) in a $1.4 billion deal aimed at expanding its production of the widely-sold crop nutrient.

Shares of Mosaic were rising 1.5% to $46.62 while CF Industries was advancing 4.6% to $219.23 in afternoon trading.

Terms of the deal call for Plymouth, Minn.-based Mosaic to pay $1.2 billion in cash for the operations, plus $200 million to fund CF Industries' asset retirement obligation escrow. The deal includes a 22,000-acre South Pasture phosphate mine and plant in Hardee County, Fla., a phosphate manufacturing facility in Plant City, Fla., and an ammonia terminal and finished-product warehouse in Tampa.

The assets to be acquired produce about 1.8 million tonnes of phosphate fertilizer per year, compared to Mosaic's annual production rate of 8.2 million tonnes. Mosaic said that the South Pasture facility is in proximity to a mine it is planning in Hardee County, and the company will save upward of $500 million by combining the operations instead of having to construct all new facilities on the planned site.

"Uniting CF Industries' phosphate operations with Mosaic's creates an ideal combination that provides the opportunity for enhanced operating efficiencies and sustainability efforts, lower production costs and reduced capital investment," Mosaic CEO James T. Prokopanko said.

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The deal makes good on Mosaic's pledge to increase its production of phosphate, an in-demand chemical for farmers. The company has been attempting to reduce its dependence on potash, another key nutrient.

As part of the deal the companies also signed supply agreements for CF Industries to provide Mosaic with up to 1 million tonnes of ammonia annually, an agreement that Mosaic said will allow it to forego a proposed $1.1 billion ammonia manufacturing plant in Faustina, La.

CF Industries, of Deerfield, Ill., said that the agreements have "significant strategic value" to both firms. Chairman and CEO Stephen R. Wilson in a statement said, "the sale of our phosphate operations represents good value for our shareholders and the full set of transactions enables us to sharpen the strategic focus on our nitrogen business."

Dorsey & Whitney LLP served as lead outside counsel to Mosaic, with Mayer Brown LLP and Arnold & Porter LLP advising in specialist capacities. Rothschild Inc. provided a fairness opinion on the phosphate sale transaction to CF Industries' board. A Skadden, Arps, Slate, Meagher & Flom LLP team consisting of Brian Duwe, Richard C. Witzel Jr., Joseph Yaffe, Matthew Zisk, John Furfaro, Maxwell Miller, William Conway, Catherine Danz and Henry Eisenberg served as legal counsel to the company.

--By Lou Whiteman in Atlanta

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