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Thursday, 07/16/2009 2:58:27 PM

Thursday, July 16, 2009 2:58:27 PM

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Mosaic Climbs After Report Vale May Bid $25 Billion (Update2)

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By Helder Marinho and Christopher Donville

July 16 (Bloomberg) -- Mosaic Co., North America’s second- largest fertilizer producer, rose the most in eight months in New York after a Brazilian newspaper reported that Vale SA is preparing a $25 billion bid for the company. Vale shares fell.

Mosaic jumped 13 percent to $50.43 as of 10:41 a.m. on the New York Stock Exchange. Vale, the world’s biggest iron-ore miner, fell 2.3 percent to $17.65, the most since July 7. Vale’s Brazilian shares declined 1.1 percent to 29.84 reais.

A five-year rally that has pushed prices of potash, a raw material used to make fertilizers, up more than 300 percent has fueled speculation that Mosaic would be acquired. O Estado de S. Paulo reported, without saying how it obtained the information, that Vale and BHP Billiton Ltd. are both interested in purchasing the company.

“Mosaic is a little more than what I was expecting,” said Marcel Varejao, who covers Vale as an analyst at Sociedade Corretora Paulista, a Sao Paulo-based brokerage. “In a time like this, strategic acquisitions are seen as positive in the long run.”

Fernando Thompson, a spokesman for Rio de Janeiro-based Vale, said the company doesn’t comment on market speculation. Linda Thrasher, a spokeswoman for Mosaic and Lisa Clemens, a spokeswoman for Cargill Inc., which owns about 64 percent of Mosaic, both declined to comment.

Buyout Targets

“We wouldn’t comment on speculation or market rumor,” BHP’s London-based spokesman Illtud Harri said in an e-mail response when asked for comment.

Mosaic has been the subject of speculation this year that it may be acquired by Melbourne-based BHP, which said in February it may expand its investments in potash. Vale agreed in January to pay Rio Tinto Group $850 million for potash projects in Argentina and Canada.

Potash is a form of potassium, a primary agricultural nutrient with phosphorus and nitrogen. Companies such as Potash Corp., Agrium Inc. and Mosaic mine the material.

Companies including Mosaic and Potash Corp. of Saskatchewan Inc., the world’s largest producer of its namesake crop nutrient, are attractive buyout targets because they have existing mines, Terence Ortslan, a mining analyst at TSO & Associates in Montreal, said in an interview last month.

Mosaic is the world’s largest maker of finished phosphate products and the second-largest producer of potash by capacity, according to the company Web site. It has three potash mines in Saskatchewan, one in New Mexico and another in Michigan. The company also mines phosphate rock in Florida.

Vale denied last month it was planning an acquisition after Anglo American Plc’s board unanimously rejected a proposal from Xstrata Plc for a “merger of equals” to create a mining company that would compete with BHP. Vale’s negotiations to acquire Zug, Switzerland-based Xstrata broke down in April last year.

Vale’s Bond Offer

Any takeover talk is “market speculation,” Chief Executive Officer Roger Agnelli said on June 25.

A $1 billion convertible bond offer announced by Vale on July 6 further fueled speculation that the miner might acquire a rival in order to compete for access to resources when commodity demand rebounds.

“Potash, along with coal and copper, is part of Vale’s M&A/growth plan,” Itau Unibanco Holding SA analysts wrote in a note to clients today. “Vale sees Potash as the new iron ore.”

Vale raised 19.4 billion reais in Brazil’s largest-ever share offering in July 2008. At the time, Agnelli said the proceeds would be used to fund acquisitions and expand existing operations.

U.S. trading of bullish Mosaic options jumped to a record on July 10 amid renewed speculation that the fertilizer producer may be acquired. Mosaic shares have rallied 43 percent this year.

To contact the reporters on this story: Christopher Donville in Vancouver at Helder Marinho at

Last Updated: July 16, 2009 12:05 EDT

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