U.S. fertilizer producer Mosaic Co. says it will buy back about 10 percent of its outstanding stock in a roughly $2 billion purchase from the Margaret A. Cargill Foundation and the Anne Ray Charitable Trust over the next eight months.
Long anticipated by investors, the transaction with the so-called MAC Trusts could underpin a stock that has fallen about 18 percent this year as overseas demand dried up for the company's phosphate and potash fertilizer products. It also eases speculation that Mosaic might be a takeover target with a large number of shares in play.
"I'm surprised a bit that the stock is trading off," says Rob Stabile, portfolio manager at LDIC Inc., which owns about 90,000 Mosaic shares on behalf of clients. "Because there's uncertainty about the price, I guess (that's) weighing on it.
"I still think net-net it's going to be a significant positive move for shareholders."
The stock weakness may reflect the delayed timetable for buying back the stock, as well as the deal removing a positive catalyst for Mosaic shares, says Scotiabank analyst Ben Isaacson in a note.
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Cargill Inc., in 2011, announced plans to split off its 64 percent stake in Mosaic under a series of agreements with the agribusiness' shareholders, including charitable trusts. Restrictions on the trusts and other stockholders transferring those shares expired on Nov. 26.
The company says it will buy 21.7 million of the MAC Trusts' shares on Jan. 8 at a price based on the volume-weighted average closing price during the previous 20 trading days. It plans to buy the remaining 21.6 million shares in seven equal installments starting in February at the close of each successive 20-day trading period.
Mosaic CEO Jim Prokopanko says the company was evaluating other moves, including possibly buying the trusts' remaining common shares.
Fertilizer producers have come under pressure this year as the price of corn -- a key crop nutrient user -- dropped well off the previous year's record high. The breakup in July of one of the world's biggest potash trading partnerships, Belarusian Potash Co., has also led to a steady potash price decline.
Mosaic was formed in 2004 by a combination of Cargill's crop nutrition business with IMC Global.
