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Yara to buy Brazilian operations from Bunge

by Renee Cordes  |  Published December 7, 2012 at 9:18 AM
Norway's Yara International ASA on Friday, Dec. 7, struck a deal with an enterprise value of $750 million to buy Bunge Ltd. operations in Brazil.

The deal includes Bunge's blending facilities, brands and warehouses but excludes its fertilizer terminal in the port of Santos, which will remain with the White Plains, N.Y.-based seller.

Yara - spun off from Norsk Hyrdo ASA in 2004 - bought Porte Alegre, Brazil-based fertilizer maker Adubos Trevo SA in 2000 and a controlling interest in Brazilian fertilizer producer and distributor Fertibras SA in 2006. Yara President and CEO Jørgen Ole Haslestad indicated Friday that further deals may follow.

"Brazil is a key growth market where there is significant further potential for acreage and yield increases," he said in a statement. "Today's agreement also creates a strong platform for future growth opportunities within the Brazilian fertilizer industry."

At the end of the third quarter, Yara had cash of 8.8 billion Norwegian kroner ($1.55 billion).

Spokesman Bernhard Stormyr highlighted Latin America, Africa and Eastern Europe as the most attractive markets Yara has identified for M&A.

The International Fertilizer Industry Association in June projected a 2.5% rise in world fertilizer demand over the 2012 to 2013 season, following a 2.8% increase the year earlier, as food, feed, fiber and bioenergy markets expand, The Paris-based association also noted that Latin America is seen as an engine of future expansion, while Asia is declining in importance.

Yara shares were up 0.5% in Oslo around midday Friday at NKr281.80, translating into a market value of about NKr81.06 billion.

One analyst said that while the deal "looks a bit expensive," strengthening its position in Brazil is the "right strategic move" for Yara.

Bunge operates 22 blending units across Brazil, delivering 4.8 million tons of fertilizer products in 2004, with revenue of $2.65 billion and adjusted Ebitda of $77 million.

Bunge and Yara have also agreed to enter into a long-term fertilizer supply agreement.

Bunge Chairman and CEO Albert Weisser said the transaction "enables Bunge to size our fertilizer activities so they are a more streamlined complement to our agribusiness operations and provides Yara with a larger position in a high-growth market."

Yara is targeting minimum annual synergies of $25 million by 2014. The $750 million enterprise value of the deal is subject to certain closing adjustments.

Credit Suisse acted as financial adviser to Bunge, which took legal advice from Brazil's Souza, Cescon, Barrieu & Flesch Advogados and a Shearman & Sterling LLP team including Clare O'Brien and Tania Mattei.

Yara said it didn't use outside financial or legal advisers.

The deal, subject to approval of Brazilian competition authorities and other regulatory clearances, is expected to close in the second half of 2013.

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Tags: Adubos Trevo SA | Albert Weisser | Bunge Ltd. | Credit Suisse | Fertibras SA | International Fertilizer Industry Association | Jørgen Ole Haslestad | Norsk Hyrdo ASA | Santos | Shearman & Sterling LLP | Souza Cescon Barrieu & Flesch Advogados | Yara International ASA

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Renee Cordes

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