AGU) was down nearly 2% to $92.94, and CF Industries ( CF) was dropping 3.7% to $143.95. Given the rocket ride that agricultural stocks have taken over the last few months, driven by record crop prices, investors may be using the Cargill news as a signpost to take profits off the table.
Takeover fever has ripped through the fertilizer sector for more than a year as agriculture companies become hot investments based on the conventional wisdom that global food demand will only increase. That thesis was entrenched last year when BHP Billiton ( BHP) went after Potash Corp. ( POT), even though the hostile takeover effort ultimately failed. Rumors flew last year that Mosaic executives sat down with their counterparts at Vale ( VALE), the Brazilian mining giant, to discuss a deal. Investors also reacted Wednesday to dilution concerns surrounding Mosaic. The Cargill shareholders who received Mosaic stock are restricted from selling those stakes immediately, but the debt holders have no such restrictions. After the deal closes -- expected in the second quarter -- some 107 million shares taken by those debt holders will be free to enter the market. Mosaic CEO Prokopanko has mentioned ways that his company might mitigate the effects of that dilution, Gleacher analyst Rodriguez said, including a share buyback plan, as well as Mosaic's possible inclusion on the S&P 500, since its share float will expand with the Cargill divestment. Moreover, a big charitable trust established by the granddaughter of Cargill's founder will receive a big chunk of Mosaic shares. The trustees of the charity said they plan to sell the Mosaic stock over the next four and a half years. Last week, fertilizer buyers in China struck a deal with Russian potash producers, inking a contract to buy 600,000 tons at $400 a ton, up $50 from the prior contract price. Industry watchers for the most part expected that increase. Potash producers of Russia, the second-biggest potash region in the world after Canada's Saskatchewan, team up to export their fertilizer via a cartel, much like their North American rivals. -- Written by Scott Eden in New York >To contact the writer of this article, click here: Scott Eden. >To follow the writer on Twitter, go to http://twitter.com/ScottEden. >To submit a news tip, send an email to: email@example.com.