THE MOSAIC COMPANY (BMV:MOS) Files An 8-K Entry into a Material Definitive Agreement
Item1.01.
| Entry into a Material Definitive Agreement. |
Stock Purchase Agreement
On December19, 2016, The Mosaic Company (Mosaic) entered
into a Stock Purchase Agreement (the Stock Purchase
Agreement) with Vale S.A. (Vale) and Vale Fertilizer
Netherlands B.V. (Vale Netherlands and, together with Vale
and certain of its affiliates, the Sellers), to which
Mosaic agreed, upon the terms and subject to the conditions set
forth in the Stock Purchase Agreement, to purchase from the
Sellers (the Purchase) Vales global phosphate and potash
operations conducted through Vale Fertilizantes S.A. (the
Company), with the Purchase to be effected through the
acquisition by Mosaic of all of the issued and outstanding
capital stock of the Company. The aggregate consideration to be
paid by Mosaic to the Sellers is comprised of (i) $1.25billion in
cash and (ii) 42,286,874 shares of Mosaic common stock, par value
$0.01 per share to be issued and delivered to Vale or an
affiliate of Vale. The cash portion of the purchase price is
subject to adjustments based on matters such as the working
capital and indebtedness balances of the Company at the time of
the closing. In addition, the Sellers will be entitled to receive
an additional amount in cash of up to $260million if certain
thresholds relating to the pricing of monoammonium phosphate and
the strength of the Brazilian Real over the two year-period
following the closing of the Purchase are satisfied.
The Company and its subsidiaries (collectively, the Company
Group) conduct global phosphate and potash operations,
including facilities and projects in the provinces of Minas
Gerais, Gois, Sergipe and So Paulo, Brazil, Saskatchewan, Canada,
and Mendoza, Argentina. The Company Group also operates certain
industrial complexes located in the City of Cubato (the Cubato
Business). The Cubato Business will not be included in the
Purchase and will instead be transferred, prior to the closing of
the Purchase, to affiliates of the Sellers. As part of the
Purchase, Mosaic will acquire the Sellers 40% economic interest
in the joint venture which owns the Miski Mayo phosphate rock
mine in the Bayovar region of Peru, in which Mosaic already holds
a 35% economic interest on the date of this report, and Vales
potash project at Kronau, Saskatchewan. In addition, under the
Stock Purchase Agreement, Mosaic has an option to acquire the
Sellers Rio Colorado, Argentina, potash project as part of the
Purchase.
Closing Conditions
The closing of the proposed Purchase is subject to number of
conditions, including, among others, (i)completion of the
transfer of the Cubato Business from the Company Group to
affiliates of the Sellers as well as other restructuring
transactions, (ii)the expiration or termination of the applicable
waiting period under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and antitrust approvals in Brazil and
Canada, (iii)the achievement of certain other specified
regulatory and operational milestones (the Regulatory
Milestones Condition), (iv) the absence of any governmental
restraint due to the recent water loss incident at Mosaics New
Wales facility in Florida that results in a reduction or
suspension of operations or increased operating costs at the
facility and would reasonably be expected to materially adversely
impact Mosaic and its subsidiaries, taken as a whole (the New
Wales Condition), (v) receipt of certain third party consents
and (vi)other customary closing conditions.
Termination; Termination Fee; Expense Reimbursement
The Stock Purchase Agreement may be terminated by Mosaic or the
Sellers in certain circumstances, including, if the Purchase has
not been consummated by December31, 2017.
If the Stock Purchase Agreement is terminated by Mosaic or Vale
because the Sellers have not obtained certain specified third
party consents within 75 days after the date of the Stock
Purchase Agreement, the Sellers may be required to pay Mosaic a
termination fee of $125million. In addition, Mosaic or the
Sellers, as the case may be, will be required to reimburse the
other partys costs and expenses incurred in connection with the
Stock Purchase Agreement up to a maximum amount of $30million if
the Stock Purchase Agreement is terminated because the Purchase
has not been consummated by December31, 2017 and the only
condition that is not satisfied on that date is, in the case of
Mosaic, the New Wales Condition and, in the case of the Sellers,
the Regulatory Milestones Condition.
Representations and Warranties; Covenants;
Indemnification
Mosaic and the Sellers each have made customary representations
and warranties and covenants in the Stock Purchase Agreement. The
Sellers have further agreed not to solicit alternative
transactions or engage in discussions concerning, or provide
confidential information in connection with, an alternative
transaction. Mosaic and the Sellers have agreed to indemnify each
other following the closing of the Purchase for breaches of
representations and warranties, breaches of covenants and certain
other matters, subject to certain conditions and limitations set
forth in the Stock Purchase Agreement.
Appointment of Vale Designee to Mosaic Board of
Directors
In the Stock Purchase Agreement, Mosaic agreed to enter into an
Investor Agreement with Vale (the Investor Agreement),
effective as of the closing of the Purchase, that will, among
other things, provide Vale with certain rights to designate up to
two individuals to Mosaics Board of Directors. The Investor
Agreement is discussed further below.
Investor Agreement
Concurrently with the closing of the Purchase, Mosaic and the
Sellers will enter into an Investor Agreement (the Investor
Agreement).
Director Designation Rights
The Investor Agreement will provide that (i)so long as affiliates
of Vale (the Vale Stockholders) beneficially own a number
of shares of Mosaic common stock representing at least 90% of the
shares to be issued to them at the closing of the Purchase
(together with any shares of Mosaic common stock received by the
Vale Stockholders in connection with any stock split, stock
dividend or similar transaction, the Shares), the Vale
Stockholderswill be entitled to designate two individuals for
nomination to Mosaics Board of Directors and (ii)so long as the
Vale Stockholders beneficially own a number of shares of Mosaic
common stock representing at least 50% of the Shares (but less
than 90% of the Shares), the Vale Stockholderswill be entitled to
designate one individual for nomination to Mosaics Board of
Directors, in each case, at each stockholders meeting at which
directors of Mosaic are elected. Each individual nominated by the
Vale Stockholders must meet the standards and qualifications set
forth in the Investor Agreement upon the reasonable determination
of Mosaics Board of Directors or its Corporate Governance and
Nominating Committee. So long as the Vale Stockholders have the
right to designate two nominees, the Vale Stockholders may only
designate one nominee who is then serving as a director, officer
or employee of Vale or any of its subsidiaries and, if the Vale
Stockholders designate two nominees, one of the two designees
must be independent with respect to Mosaic under the rules
governing companies listed on the New York Stock Exchange and
under Mosaics Director Independence Standards.
Transfer and Standstill Restrictions
The Investor Agreement will also provide that, during the
two-year period following the closing of the Purchase, the Vale
Stockholders may not transfer any of the Shares that they
beneficially own, except that the Vale Stockholders may transfer
Shares to one or more of their respective affiliates, with the
written consent of Mosaic or in connection with a business
combination transaction involving Mosaic (including a third party
tender or exchange offer that is recommended by Mosaics Board of
Directors). So long as the Vale Stockholders beneficially own 5%
or more of the outstanding voting securities of Mosaic, however,
the Vale Stockholders may not, subject to certain specified
exceptions, transfer any Shares to (i)any person if, after giving
effect to such transfer, such person would beneficially own
voting securities that represent 5% or more of the total voting
power of Mosaic or (ii)certain specified competitors of Mosaic
and other persons identified in the Investor Agreement.
In addition, during the period (the Standstill Period)
from the closing of the Purchase until the later of the third
anniversary of the closing of the Purchase and the date on which
Mosaics Board of Directors no longer includes any designees of
the Vale Stockholders, Vale and the Vale Stockholderswill be
subject to certain standstill restrictions. Under such standstill
restrictions, Vale and the Vale Stockholders may not, among other
things, acquire any shares of Mosaic common stock, except that
(i)if, at the closing of the Purchase, the shares to be received
by the Vale Stockholders at the closing of the Purchase represent
less than 15% of the total voting power of Mosaic, the Vale
Stockholders may, during the subsequent 2-year period, acquire
additional shares of Mosaic common stock so long as the shares of
Mosaic common stock beneficially held by the Vale Stockholders
Shares (including such additional shares of Mosaic common stock)
do not represent more than 15% of the total voting power of
Mosaic and (ii)so long as the Vale Stockholders have the right to
designate at least one director nominee, the Vale Stockholders
may, in connection with a bona fide registered public offering by
Mosaic of voting securities for cash for its own account, acquire
additional shares of Mosaic common stock in the open market or,
under certain circumstances, to such public registered offering
so long as, immediately after such acquisition, the total voting
power represented by the Mosaic common stock beneficially owned
by the Vale Stockholders immediately following the acquisition is
not greater than the total voting power represented by the Mosaic
common stock beneficially owned by the Vale Stockholders
immediately prior to such acquisition.
Voting Agreement
During the Standstill Period, the Vale Stockholders will vote all
voting securities of Mosaic that they beneficially own (i)with
respect to any proposal or resolution relating to the election of
directors, in accordance with the recommendation of Mosaics Board
of Directors and (ii)with respect to any other proposal or
resolution, at their election, either in the same manner as, and
in the same proportion to, all voting securities that are not
beneficially held by the Vale Stockholders are voted or in
accordance with the recommendation of Mosaics Board of Directors.
After the date on which the Mosaic Board no longer includes a
nominee designated by the Vale Stockholders, the Vale
Stockholders may vote all of the voting securities of Mosaic they
beneficially own in their sole discretion with respect to any
proposal or resolution relating to any merger, consolidation,
business combination or other extraordinary transaction involving
Mosaic or any of its subsidiaries.
Non-Competition and Non-Solicitation Covenants; Registration
Rights; Termination
Under the Investor Agreement, Vale and the Vale Stockholders
agreed to a three-year non-competition and a two-year employee
non-solicitation covenant. In addition, the Vale Stockholders
will be entitled to certain demand and customary piggyback
registration rights beginning on the 2nd anniversary of the closing of
the Purchase.
Except for certain specified provisions, the Investor Agreement
will terminate (i)upon the mutual agreement of the parties
thereto or (ii)upon the later to occur of (x)the 3rd anniversary
of the closing of the Purchase and (y)the date on which the Vale
Stockholders no longer beneficially own any Shares.
Additional Information
The foregoing descriptions of the Stock Purchase Agreement and
the Investor Agreement do not purport to be complete and are
subject to, and qualified in their entirety by reference to, the
full text of the Stock Purchase Agreement and the form of
Investor Agreement, respectively, copies of which are attached as
Exhibits 2.1 and 2.2, respectively, to this Current Report on
Form 8-K and are incorporated herein by reference.
The Stock Purchase Agreement and the Investor Agreement have been
attached as Exhibits to this Current Report on Form 8-K to
provide investors with information regarding their respective
terms. They are not, however, intended to provide any other
factual information about Mosaic, Vale or their respective
subsidiaries or affiliates. The representations, warranties and
covenants contained in the Stock Purchase Agreement and the
Investor Agreement: (i)were made only for the purposes of those
agreements and as of specific dates; (ii)were made solely for the
benefit of the parties thereto; (iii)may be subject to
limitations agreed upon by such parties, including being
qualified by confidential disclosures that were delivered to the
parties in connection with the execution and delivery of the
Stock Purchase Agreement and that were made for the purpose of
allocating contractual risk between the parties thereto instead
of establishing these matters as facts; and (iv)may be subject to
standards of materiality applicable to the contracting parties
that differ from what might be viewed as material by investors.
Moreover, information concerning the subject matter of the
representations, warranties and covenants may change after the
dates of the Stock Purchase Agreement or the Investor Agreement,
which subsequent information may or may not be fully reflected in
public disclosures by the parties thereto. Accordingly, investors
should not rely on the representations, warranties and covenants
contained in the Stock Purchase Agreement or the Investor
Agreement or any descriptions thereof as characterizations of the
actual state of facts or condition of Mosaic, Vale or any of
their respective subsidiaries or affiliates.
Item3.02 Unregistered Sales of Equity Securities
to the Stock Purchase Agreement described above in Item 1.01 of
this Current Report on Form 8-K, which disclosure is incorporated
herein by reference, Mosaic has agreed to deliver 42,286,874
shares of its common stock to Vale or an affiliate of Vale as
part of the purchase price at the closing of the Purchase,
subject to the satisfaction of the applicable closing conditions.
The issuance of such shares by Mosaic to the Sellers will be made
to the exemption from registration provided by Section 4(a)(2) of
the Securities Act of 1933, as amended (the Securities
Act) and/or Rule 506 promulgated thereunder.
Item7.01 Regulation FD
The following information is being furnished in accordance with
General Instruction B.2. of Form 8-K and shall not be deemed
filed for purposes of Section18 of the Securities Exchange Act of
1934, as amended (the Exchange Act), or otherwise subject
to the liabilities of that section, nor shall it be deemed to be
incorporated by reference in any filing under the Securities Act
or the Exchange Act, except as expressly set forth by specific
reference in such filing:
On December19, 2016, Mosaic issued a press release announcing the
transaction. A copy of the press release is furnished as
Exhibit99.1 to this Current Report on Form 8-K and incorporated
herein by reference.
Forward Looking Statements
This report contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995.
Such statements include, but are not limited to, statements about
our proposed acquisition of the global phosphate and potash
operations of Vale S.A. (Vale) conducted through Vale
Fertilizantes S.A. (the Transaction) and the anticipated
benefits and synergies of the proposed Transaction, other
proposed or pending future transactions or strategic plans and
other statements about future financial and operating results.
Such statements are based upon the current beliefs and
expectations of The Mosaic Companys management and are subject to
significant risks and uncertainties. These risks and
uncertainties include, but are not limited to: risks and
uncertainties arising from the possibility that the closing of
the proposed Transaction may be delayed or may not occur,
including delays or risks arising from any inability to obtain
governmental approvals of the Transaction on the proposed terms
and schedule, any inability of Vale to achieve certain other
specified regulatory and operational milestones or to
successfully complete the transfer of the Cubato business to Vale
and its affiliates in a timely manner, and the ability to satisfy
any of the other closing conditions; our ability to secure
financing, or financing on satisfactory terms and in amounts
sufficient to fund the cash portion of the purchase price without
the need for additional funds from other liquidity sources;
difficulties with realization of the benefits of the proposed
Transaction, including the risks that the acquired business may
not be integrated successfully or that the anticipated synergies
or cost or capital expenditure savings from the Transaction may
not
be fully realized or may take longer to realize than expected,
including because of political and economic instability in Brazil
or changes in government policy in Brazil; the predictability and
volatility of, and customer expectations about, agriculture,
fertilizer, raw material, energy and transportation markets that
are subject to competitive and other pressures and economic and
credit market conditions; the level of inventories in the
distribution channels for crop nutrients; the effect of future
product innovations or development of new technologies on demand
for our products; changes in foreign currency and exchange rates;
international trade risks and other risks associated with Mosaics
international operations and those of joint ventures in which
Mosaic participates, including the risk that protests against
natural resource companies in Peru extend to or impact the Miski
Mayo mine, the ability of the Waad Al Shamal Phosphate Company
(also known as MWSPC) to obtain additional planned funding in
acceptable amounts and upon acceptable terms, the timely
development and commencement of operations of production
facilities in the Kingdom of Saudi Arabia, the future success of
current plans for MWSPC and any future changes in those plans;
difficulties with realization of the benefits of our long term
natural gas based pricing ammonia supply agreement with CF
Industries, Inc., including the risk that the cost savings
initially anticipated from the agreement may not be fully
realized over its term or that the price of natural gas or
ammonia during the term are at levels at which the pricing is
disadvantageous to Mosaic; customer defaults; the effects of
Mosaics decisions to exit business operations or locations;
changes in government policy; changes in environmental and other
governmental regulation, including expansion of the types and
extent of water resources regulated under federal law, carbon
taxes or other greenhouse gas regulation, implementation of
numeric water quality standards for the discharge of nutrients
into Florida waterways or efforts to reduce the flow of excess
nutrients into the Mississippi River basin, the Gulf of Mexico or
elsewhere; further developments in judicial or administrative
proceedings, or complaints that Mosaics operations are adversely
impacting nearby farms, business operations or properties;
difficulties or delays in receiving, increased costs of or
challenges to necessary governmental permits or approvals or
increased financial assurance requirements; resolution of global
tax audit activity; the effectiveness of Mosaics processes for
managing its strategic priorities; adverse weather conditions
affecting operations in Central Florida, the Mississippi River
basin, the Gulf Coast of the United States or Canada, and
including potential hurricanes, excess heat, cold, snow, rainfall
or drought; actual costs of various items differing from
managements current estimates, including, among others, asset
retirement, environmental remediation, reclamation or other
environmental regulation, Canadian resources taxes and royalties,
or the costs of the MWSPC, its existing or future funding and
Mosaics commitments in support of such funding; reduction of
Mosaics available cash and liquidity, and increased leverage, due
to its use of cash and/or available debt capacity to fund
financial assurance requirements and strategic investments; brine
inflows at Mosaics Esterhazy, Saskatchewan, potash mine or other
potash shaft mines; other accidents and disruptions involving
Mosaics operations, including potential mine fires, floods,
explosions, seismic events, sinkholes or releases of hazardous or
volatile chemicals; and risks associated with cyber security,
including reputational loss; as well as other risks and
uncertainties reported from time to time in The Mosaic Companys
reports filed with the Securities and Exchange Commission. Actual
results may differ from those set forth in the forward-looking
statements.
| Item9.01. | Financial Statements and Exhibits. |
(d) Exhibits.
Reference is made to the Exhibit Index hereto with respect to the
exhibit furnished herewith.
About THE MOSAIC COMPANY (BMV:MOS)
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