Mosaic Deal Hopes Fade as BHP Bets on Own Potash Mine: Real M&A – by Tara Lachapelle and Elisabeth Behrmann (Bloomberg News – August 22, 2013)

Mosaic Co. (MOS:US)’s takeover prospects are diminishing after BHP Billiton Ltd. (BHP) renewed a commitment to building its own potash mine.

BHP this week said it plans to see the Jansen potash project through to production as it invests $2.6 billion and seeks partners, damping speculation that the world’s biggest mining company may still consider a purchase of fertilizer maker Mosaic. Mosaic’s enterprise value has fallen to $14.8 billion, about the same as the estimated cost of constructing Jansen, its first potash mine.

Buying Mosaic would have been a logical alternative to building Jansen, which may not begin producing fertilizer until 2020, Sanford C. Bernstein & Co. said. Mosaic became a cheaper target this month as it dropped to its lowest price relative to book value on concern that the breakup of a Russian-led export venture will flood the market with supply and suppress potash prices. Even as hurdles to a sale of Mosaic were lifted this year, potential buyers are scarce, especially as BHP’s new project promises even more supply to come.

“The additional spending shows BHP wants to go ahead with Jansen,” Paul McTaggart, a Sydney-based analyst at Credit Suisse Group AG, said in a phone interview. “There’s now no turning back.”

A Mosaic takeover is “wishful thinking” on the part of Mosaic shareholders, he said.

Plymouth, Minnesota-based Mosaic doesn’t comment on speculation, said spokesman Rob Litt, when asked about the potential for a sale.

Less Risky

BHP, based in Melbourne, declined to comment on a potential acquisition of Mosaic. Completing the Jansen project and eventually starting production at the mine “is indeed my intention,” BHP Chief Executive Officer Andrew Mackenzie said Aug. 20 on a call with reporters.

BHP is cautiously entering a new market “in a very flexible way,” he said. That approach is less risky than “paying a huge sum of money up front into something where you’re in or you’re out.”

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