Yara buys controlling stake in Fertibras for $126m

Source: ICIS News

2006/07/18

LONDON (ICIS news)--Yara International has bought a 48.09% controlling stake in Brazilian fertiliser distribution and marketing company Fertibras for $126m (€100m), the Norway-headquartered fertiliser group said on Tuesday.

The deal will make Yara the second largest fertiliser player in the Brazilian market behind Bunge.

"Brazil is one of the most important fertiliser markets in the world and is key to our growth strategy," said Yara president and chief executive Thorleif Enger.

"Yara already has a strong market position and an efficient operation in the country based on the acquisition of Adubos Trevo in 2000. The acquisition of Fertibras will further strengthen Yara's position and scale, and create a strong platform for further consolidation of the Brazilian fertiliser industry," he added.

The deal, which is subject to Brazilian regulatory approval, will give Yara 99.95% of the voting shares in Fertibras. The remaining 51.91% equity stake in Fertibras is held primarily by investment funds.

Fertibras has annual sales in Brazil of up to 1m tonnes of fertiliser through its ownership of a number of warehouses and bulk blending plants. It also holds a 15% stake in Fosfertil, the biggest producer of nitrogen and phosphate fertilisers in Brazil. Fosfertil has rock mining operations and produces all the main phosphate products for Brazilian agriculture.

Yara said Fosfertil has several nitrogen fertiliser plants producing mainly ammonia, urea and ammonium nitrate (AN). Total production capacity after recent expansions amounts to about 2.6m tonnes of phosphate fertiliser, almost 1m tonnes of nitrogen fertilizer, and about 0.3m tonnes of products for other industrial uses.

Fosfertil's main ammonia production is based on the same technology in use at Yara's plant in Brunsbüttel, Germany, which uses heavy fuel oil from a neighbouring refinery.

Yara said this will give it access to local production and a distribution network that complements its existing market positions.

The Fertibras deal will, added Yara, also offer significant synergy opportunities and put it in a better position to balance domestic production with imported sourcing.
 
Brazil is one of the fastest growing fertiliser markets, with a 6% average annual growth rate over the last ten years, said Yara. The country, which still has large undeveloped areas suitable for agriculture, imports about 60% of its fertiliser needs. 

Fertibras, which at the end of 2005 had a net interest bearing debt of $77m, will be consolidated in Yara's accounts.

Announcement of the Fertibras deal coincided with the publication of Yara's second quarter financial results. It reported a 17% drop to NKr924m ($146m/€117m) in operating income as higher energy and feedstock costs outweighed increased fertiliser prices.