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PotashCorp buys stake in Heringer to expand in Brazil

(Dave Bedard photo)

Sao Paulo | Reuters — Potash Corporation of Saskatchewan, the world’s largest fertilizer company by market value, agreed on Monday to pay about $69.8 million for a 9.5 per cent stake in Brazilian rival Fertilizantes Heringer SA, the latest effort by PotashCorp to grow in Latin America’s largest economy.

The deal, which is expected to close in the second half of this year, paves the way for PotashCorp to become Heringer’s principal potash supplier over time, the Canadian company said in a statement. The transaction is subject to regulatory approval in Brazil.

Under terms of the agreement, PotashCorp will acquire the stake from Heringer’s controlling shareholders Dalton Dias Heringer, Dalton Carlos Heringer and Juliana Heringer Rezende, a source with knowledge of the deal said. As part of the deal, the Heringers signed a shareholder agreement granting PotashCorp minority rights, the source added.

PotashCorp paid about 31.15 reais (C$13.58) per share for the stake, almost nine times Heringer’s closing price of 3.51 reais on Friday, according to the source. Shares of Heringer posted their biggest intraday surge in more than six years on Monday, surging almost 17 per cent to 4.10 reais.

Heringer, one of the largest fertilizer companies in Brazil, delivered five million tonnes of fertilizers, including about one million tonnes of potash in 2013, with net revenue of about $3.1 billion. Last year, the Heringers sold a 10 per cent stake to Morocco’s OCP SA for about $69 million.

The Heringer investment provides PotashCorp “with an important stake in a leading Brazilian fertilizer distribution company,” PotashCorp CEO Jochen Tilk said in the statement.

Reporting for Reuters by Guillermo Parra-Bernal and Ashutosh Pandey.

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