Is Potash (POT) a Buyer or Seller?

Investors are talking about whether Potash Corp. of Saskatchewan (NYSE:POT) will start to monetize its strategic investments, with an ultimate goal of returning the cash to shareholders.

Potash Corp. owns a 32% stake in Chilean specialty fertilizer and industrial chemicals producer Soquimich Comercial SA, 28% of Jordan-based miner Arab Potash Co., 22% of Chinese agricultural giant Sinofert Holdings Ltd. and 14% of Israel Chemicals Ltd.

Together, these investments are worth about $33 a share (pre-split), according to Scotia Capital analyst Ben Issaacson.

In a note to clients, he explained that BHP Billiton’s (NYSE:BHP) $130 a share hostile takeover bid for Potash brought the fertilizer giant’s four strategic stakes into the spotlight.

Cargill Inc.’s decision to start selling its 64% stake in Mosaic Co. (NYSE:MOS) has also prompted investor interest in monetization for Potash Corp., as have fertilizer equity valuations that Mr. Issaacson believes look “somewhat rich,” suggesting the cycle peak is approaching.

However, the analyst thinks Potash Corp. is more of a buyer than a seller. His discussions with the company this week show that it is is maintaining its investment positions due to the fertilizer-related market intelligence provided, their potash-first strategies, and the low-cost positions of some of these stakes.




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Archer Daniels Midland (NYSE:ADM), Bunge Ltd (NYSE:BG), Cargill Land Deal with Chinese Importers

With the backdrop of a huge and surprising deal by China to acquire soybeans from American farmers, valued at $6.7 billion, companies like Archer Daniels Midland (NYSE:ADM), Bunge Ltd (NYSE:BG) and Cargill signed deals with major Chinese importers, including COFCO and Sinograin.

The deal for soybeans by China was the largest it has ever entered in as a one-off deal.

Dealers responded saying they thought there would be a symbolic purchase of soybeans, but not a legitimate, major deal like the one entered into.

It is believed the Chinese made it over concerns soybean prices could rise significantly throughout 2011, so they locked in prices now.

The overall deal represents 11.5 million tons of soybeans to be delivered in 2011 incrementally. The overall total is enough to meet the import demand of the Chinese for up to three months.

Soybeans acquired by China will be for delivery in the 2011/12 (September-to-August) marketing year.

Prices for soybeans have reached a 30-month high in January on Chinese demand and production concerns in South America.

Mosaic (NYSE:MOS) Shares Drop Back to Earth on No Potential Short-Term Suitor

Shares of Mosaic (NYSE:MOS) have fallen as quickly as they rose on the news Cargill was selling their 64 percent stake in Mosaic.

Speculation there was a buyer waiting in the wings was quickly dashed, and the share price of Mosaic has plunged today as a result.

The structuring of the deal took a lot of the short term luster off the stock, which focused on longer term considerations. That, probably more than anything, burst the speculative bubble quickly.

That changes nothing concerning Mosaic as a company, as Canaccord notes, We reiterate our recommendation on the shares of Mosaic following the announced transaction by Mosaic and Cargill that would result in the distribution of Cargill’s 64% (286 million shares) equity stake in Mosaic to Cargill’s shareholders and debt holders. Although complex, this transaction does not alter our view of Mosaic’s earnings expectations, nor our target price for the company."

Canaccord Genuity maintains a "Buy" rating on Mosaic (MOS), which was trading at $78.25, falling $6.82, or 8.02 percent, as of 1:13 PM EST. Canaccord has a price target of $96 on Mosaic.

Cargill Selling Mosaic (NYSE:MOS) Stake for $24.3 Billion

Cargill announced it is selling it 64 percent stake in fertilizer company Mosaic (NYSE:MOS) for $24.3 billion, probably satisfying private shareholders wanting to cash out of the company, while at the same time making Mosaic a prime takeover target in a booming industry.

Cashing out would come by stock being transferred to Mosaic, which would then be sold off.

Cargill is the largest private company in the world, which doesn't allow for cashing out unless an approved of suitor were to buy up shares of private owners; a difficult task, as shown by this deal.

The shares in Mosaic held by Cargill will be converted to approximately 115 million shares of common stock, 60 million shares of Class A stock, and 111 million shares of Class B stock.

With the exception of Cargill, Mosaic shareholders will receive one share of recapitalized common stock for each Mosaic share they own.

The Class A shares carry with it one vote on everything related to Mosaic, and Class B carry with it 10 votes, but those only can be used when electing directors of the company.

Expectations are it probably won't be long after the close of the deal before Mosaic receives a takeover offer.