SAO PAULO (Reuters) - Norway’s Yara International ASA (YAR.OL), a global producer and distributor of fertilizers, has reached an agreement to buy Vale SA’s VALE5.SA fertilizer complex in Cubatão, Brazil, for $255 million in cash, the company said on Friday.
The deal, which Yara expects to be completed by the second half of next year, will give the Norwegian company the ability to produce in Brazil nitrogen-based fertilizers such as ammonium nitrate, largely used in sugar cane cultivation. Brazil is the world’s largest cane producer and processor.
The agreement also marks another step for mining giant Vale, the world’s largest iron ore exporter, in its divestiture program that aims to concentrate investment in its core areas and raise cash to reduce debt.
“It is a deal that makes sense for both companies,” Lair Hanzen, head of Yara’s Brazil unit, told reporters in a conference call.
Hanzen said the acquisition will allow Yara to double its fertilizer production capacity in Brazil to 3 million tonnes per year.
Yara plans to spend $80 million more in the complex in the next three years to upgrade equipment and systems.
The Norwegian company has a string of acquisitions in the Brazilian fertilizer sector. Since it entered the country in 2000 buying Adubos Trevo, it has expanded by acquiring Fertibras in 2006, Bunge’s fertilizer unit in 2013 and by agreeing to a joint venture with Galvani in 2014.
Hanzen said the latest deal shows the company’s strategy looking at the prospect of ever-higher agricultural production in Brazil and the need to reduce the country’s dependence on fertilizer imports.
Brazil currently buys abroad around 70 percent of fertilizer it uses and it is considered one of few places in the world capable to still increase areas for agriculture.
Hanzen said the company will continue to look at opportunities in Brazil, but stressed that Yara has its “hands full” after recent acquisitions and new projects such as the Serra do Salitre, in the Minas Gerais state, that should produce 1.2 million tonnes of fertilizers per year.
Yara’s acquisition of Vale’s complex in Cubatão is subject to approval from Brazilian regulators. The cash payment to Vale is expected to come after the approval, Yara said.
Reporting by Marcelo Teixeira; Editing by Will Dunham