Norway's Yara buys Brazilian phosphate miner

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Fertilizer firm Yara agreed to buy a 60 percent stake in Brazilian phosphate miner Galvani Indústria for $390 million, including future equity commitments, further expanding in its key market.

Norway's Yara will pay Brazilian entrepreneur Rodolfo Galvani Jr $225 million for the stake and has committed to injecting $165 million of fresh equity, while also agreeing to spend around $550 million until 2019 on developing the firm's mines.

"The Galvani acquisition will help secure phosphate fertilizer capacity in the centre of the country and in the attractive and fast-growing agri frontiers of Brazil," Yara said in a statement. "This acquisition represents another significant step in realizing our Latin American growth strategy."

Yara spokesman Thor Giaever said the firm also has an option to buy the remaining 40 percent of Galvani, but only after completion of expansion projects, with the option price related to earnings.

The deal comes a year after Yara completed its $750 million acquisition of Bunge's fertilizer business in Brazil, which gave it 22 blending facilities across the country along with some production capacity.

The Galvani business, which owns mining, production, blending and warehousing facilities, had revenues of $352 million last year and earnings before interest, tax, depreciation and amortisation of $48 million.

The firm has one brownfield and two greenfield mining projects under development with capacity of more than 2 million tonnes of phosphate rock per year. Start-up is expected three to five years after Yara completes the deal.

"These appear reasonably full valuation metrics, but the company specialises in the downstream phosphate fertiliser SSP (single superphosphate) which sees strong growth in Brazil," brokerage Liberum said in a note. "Galvani is also backwardly integrated into phosphate rock which allows solid margins."

Yara spokesman Giaever said there were more consolidation opportunities in Brazil and Latin America but declined to comment on whether the company would make more acquisitions in the near future.

Swedbank analyst Hans Erik Jacobsen said Brazil is the world's fourth-biggest consumer of fertilizer and one of the countries where consumption was growing fastest.

"Fifty percent of the phosphate consumed in Brazil is imported, so local production should be very profitable," Jacobsen said.

Yara shares were up 0.5 percent at 292.2 crowns in morning trading, in line with Oslo's main share index.


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