Mosaic shares surge after report on Vale bid

TORONTO (Reuters) - Shares of Mosaic Co (MOS.N) rose nearly 11 percent on Thursday after a Brazilian newspaper reported that Brazil's Vale (VALE5.SA) (VALE.N), the world's largest iron ore miner, may bid for the fertilizer company.

The Estado de S. Paulo newspaper said the deal could be worth about $25 billion, or $56 per share, sending shares of Mosaic company up 11.7 percent to $49.77 on the New York Stock Exchange.

Mosaic, is one of the world's largest producers of concentrated phosphate and potash, two of the primary nutrients required to grow food grains and other crops.

Global interest in potash has risen sharply in the last couple of years, as a very small group of companies controls about 75 percent of global supply, and the price has until recently remained stubbornly high.

Mosaic, which is controlled by commodity giant Cargill CARG.UL and IMC Global, currently has roughly 444 million shares outstanding and a market capitalization of about $22 billion.

Analysts think the deal is easily feasible for the cash-rich Brazilian mining giant.

"From a big-picture perspective it fits with Brazil's stated strategy of becoming self-sufficient in fertilizer," said Morningstar analyst Ben Johnson.

"Mosaic would be the best fit in terms of the assets that are out there, given that they have got substantial potash and phosphate assets and a distribution network that is already in place," he added.

Vale, after failing in its estimated $90 billion bid for mining rival Xstrata (XTA.L) over a year ago, has changed its approach and is targeting smaller acquisitions with particular emphasis on the fertilizer sector.

Earlier this year, Vale spent $850 million on the purchase of potash assets in Argentina and Canada.

Still, Bank of America analyst Felipe Hirai expressed doubt that Cargill would sell its stake in the company even at what would have represented a more than 25 percent premium before trading began on Thursday.

"We believe Cargill has a constructive longer-term outlook for phosphate and potash fertilizers, and thus is an unlikely seller of Mosaic from a strategic view," Hirai wrote in a research note.

"Cargill does not need the cash, as its balance sheet is stronger than it has been in many years. Given Mosaic's market cap neared 60 billion a year ago, we believe any bid for Mosaic that would interest Cargill would have to be much higher than the reported $25 billion."

He said that if Cargill does show a willingness to sell, it could bring in higher offers from elsewhere, like miner BHP Billiton. (BHP.AX) (BLT.L)

Minnesota-based Mosaic has operations in several U.S. states and in the potash-rich western province of Saskatchewan in Canada.

Mosaic also controls 62 percent of Brazilian fertilizer producer Fospar, which has a terminal at Paranagua port. It has a 42 percent stake in the Cubatao Fertilizer Industry, which mixes and distributes fertilizers in Brazil, while it also has a nearly 20 percent stake in local fertilizer heavyweight Fosfertil.

A number of other companies have been scouting for potash assets and earlier on Thursday Canada's Athabasca Potash Inc (API.TO) said it is exploring a possible sale of all or part of the company.

Vale told Reuters its policy was not to comment on rumors when asked about the reported bid. Both Mosaic and Cargill declined to comment.

(Reporting by Euan Rocha in Toronto, Michael Erman in New York and Reese Ewing in Sao Paulo)