Cargill to Give Up Mosaic Stake in $24.3 Billion Deal

A friend of ours was working on this deal from the PR end - quite interesting!

Cargill to Give Up Mosaic Stake in $24.3 Billion Deal

Agribusiness giant Cargill Inc. said Tuesday it plans to give up its majority stake in fertilizer company Mosaic Co. in a transaction valued at about $24.3 billion. The move could make Mosaic, a leading seller of potash and phosphate, a more attractive takeover target, while helping to finance a major new charity.

The transaction also foretells a significant reordering of Cargill, a closely held company that is one of the largest but least-known U.S. corporations.
In addition, the move will allow Cargill family members and trusts to effectively cash out of some of their holdings in the company.

 

Agribusiness giant Cargill Inc. said it plans to give up its majority stake in fertilizer company Mosaic in a transaction worth about $24.3 billion. Dennis Berman has details.

Companies involved in producing crop nutrients are seen as takeover targets in light of increasing food demand from countries such as China and constraints on global food supplies.

Players like BHP Billiton Ltd., which launched a failed $38.6 billion bid for Canada's Potash Corp. of Saskatchewan last year, and Brazilian miner Vale SA could be interested in Mosaic, people familiar with the situation said.

Mosaic, based in Plymouth, Minn., has a market capitalization of about $38 billion.

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Cargill owns 286 million shares, or about 64%, of Mosaic, giving its stake a value of roughly $24.3 billion based on Mosaic's stock price of $85.07 in 4 p.m. New York Stock Exchange trading Tuesday.
The transaction is structured to minimize taxes for all parties involved. The company plans to offer its Mosaic stake to Cargill shareholders, in return for Cargill shares, in what is known as a tax-free split-off.
While the deal puts restrictions on the ability of Cargill shareholders to transfer some of their Mosaic shares for several years, they would be allowed to sell their shares to a suitor of Mosaic whose offer complies with tax-free rules.

"Yes, it is possible for Mosaic to be acquired, as it was before the announcement of this transaction," said Jim Prokopanko, Mosaic's chief executive officer. "But there are certain limits on third-party transactions."
The deal, which is subject to the approval of a majority of the minority Mosaic shareholders, is largely being driven by the 2006 death of Margaret A. Cargill, who was the granddaughter of the company founder, and controlled about 17% of the company.

Representatives of her charitable trusts lobbied for years for some way to cash in her closely-traded shares, including the idea of having Cargill arrange for a public offering of her shares.
Through the Mosaic transaction, Ms. Cargill's charitable trusts would receive about 110 million Mosaic shares, which are currently valued at $9.4 billion. Margaret Cargill's trustees intend to sell their Mosaic shares over 4½ years.

The deal would rank Margaret Cargill's charities among the largest 25 grant-writing foundations in the nation. Her charities support causes such as the American Red Cross, the YMCA, public televison, elder care and Native American arts.

Cargill also said it will pay down potentially billions of dollars in debt by swapping it for about 107 million Mosaic shares, minimizing its debt service and improving the Minneapolis-based company's balance sheet.
The deal represents a huge return on Cargill's seven-year-old investment in Mosaic. Cargill management created Mosaic in early 2004 by combining $1.7 billion of its fertilizer assets with IMC Global Inc., then a struggling fertilizer company.

The Mosaic transaction would be the latest move by the tight-lipped company to reward its owners while steering clear of the one option that has always been forbidden: going public. Cargill's managers have long argued that staying private helps their ability to navigate in volatile commodity markets without having to cope with Wall Street's short-term expectations.

Cargill, which generated revenue of $107.9 billion during its fiscal year ended May 31, 2010, is one of America's largest closely held companies. Its operations touch on many of the world's agricultural businesses, from slaughtering pigs in the Midwest to exporting crops to China to ginning cotton in Africa.

Most of the stock in the 145-year-old company is owned by about 100 people who are descendents of the founding MacMillan and Cargill families, who were brought together by marriage more than a century ago.
Cargill was founded by William Wallace Cargill, the son of a Scottish sea captain, who started a frontier grain elevator in Iowa in 1865. Many of his descendants spent their lives at the company, often starting near the bottom in remote locations around the globe.

Despite Cargill's ever-expanding size, dividends were modest and family members often cashed in their shares at a fraction of the potential value.

In recent decades, however, a growing part of the job of Cargill's senior executives has been to manage the financial desires of its younger owners, many of whom have sought careers outside of the company. The last chief executive officer who was a family member, Whitney MacMillan, retired in 1995.

Beginning in the 1990s, the company sweetened its dividend formula, put younger family members on its board and created an employee stock-ownership plan so that family members have a way to sell some shares. About 25,000 Cargill employees own about 7% of the company.

Cargill has a long history of investing in businesses when they are out favor. It created Mosaic when grain markets were in the doldrums and prices of fertilizers were depressed.

Cargill has benefited from a global grain boom in part by exporting more crops. But the most dramatic impact on its earnings has come from its stake in Mosaic, the stock price of which has doubled since June.
Cargill reported last week that earnings for its second fiscal quarter ended Nov. 30 tripled to $1.49 billion from the prior year. About 44% of Cargill's earnings came from Mosaic.

Earlier this month, Mosaic said fiscal 2011 second-quarter earnings were $1 billion, compared with $107.8 million a year earlier. Sales totaled $2.7 billion, up from $1.7 billion in the same period last year.
Cargill's future earnings would be more modest without Mosaic's contribution, but the deal could give Cargill a stronger balance sheet for making acquisitions in different areas. While high grain prices are helping the profits of many agricultural and food-related companies, they are also creating a financial strain by greatly raising their working capital needs, make them more vulnerable to overtures.

Under the deal, Cargill will let Cargill shareholders exchange Cargill shares for about 179 million Mosaic shares held by Cargill. Cargill will swap the remaining 107 million Mosaic shares for Cargill debt owned by bondholders and others.

After the closing of the split-off, Mosaic will resell about 157 million Mosaic shares through a secondary offering.

Credit Suisse Group and law firm Fried, Frank, Harris, Shriver & Jacobson LLP were advisers to Cargill. J.P. Morgan Chase & Co. and law firm Simpson Thacher & Bartlett LLP advised the special committee of Mosaic's board of directors. UBS AG and law firm Loeb & Loeb LLP advised the Cargill trust.

From:http://online.wsj.com/article/SB10001424052748703954004576090290720390356.html

mergers, mergers on the wall

Ok, forgive the title, but check out today's media bite (source - NY Times):

Comcast-NBC Deal Wins Federal Approval

By BRIAN STELTER and TIM ARANGO

6:00 p.m. | Updated The proposed combination of Comcast and NBC Universal was approved by the Federal Communications Commission and the Justice Department on Tuesday, smoothing the way for the deal to close by the end of January.

As expected, the approvals came with significant conditions attached. The combination of Comcast’s cable systems and NBC Universal’s channels will create a media powerhouse, and it will represent the first time that a cable company will control a major broadcast network.

“This is a proud and exciting day for Comcast,” Brian L. Roberts, the Comcast chief executive, said in a statement that thanked the government agencies for their hard work.

The approval has been expected for at least the last few weeks. It has been the subject of intense lobbying both by Comcast and by opponents of the deal, who fear that Comcast will restrict access to NBC programming. Comcast says the deal will help achieve its vision of anytime, anywhere access to content.

As is normal in media mergers, the F.C.C. imposed a long list of conditions on the deal. They were outlined in an F.C.C. news release on Tuesday. The conditions are intended to ensure that Comcast plays fair when dealing with rival programmers, cable providers and broadband Internet providers. Many of the conditions are intended to remain in place for seven years, an unusually long period of time.

The F.C.C. vote was 4 to 1, with the senior Democratic commissioner, Michael J. Copps, casting the dissenting vote. Mr. Copps, who had expressed doubt in the past about whether the combination would benefit consumers, said in a statement Tuesday that it “confers too much power in one company’s hands.”
Mr. Copps also said, “The Comcast-NBCU joint venture opens the door to the cable-ization of the open Internet. The potential for walled gardens, toll booths, content prioritization, access fees to reach end users, and a stake in the heart of independent content production is now very real.”

Seeming to temper that concern, Julius Genachowski, the F.C.C. chair, said in his own statement that the conditions imposed by the F.C.C. “include carefully considered steps to ensure that competition drives innovation in the emerging online video marketplace.” He continued, “Our approval is also structured to spur broadband adoption among underserved communities; to increase broadband access to schools and libraries; and to increase news coverage, children’s television, and Spanish-language programming.”
In coordination with the F.C.C., the Justice Department’s antitrust division said it would not block the deal, but like the F.C.C. it put a number of conditions in place.

Notably, Comcast is being required to give up NBC Universal’s management stake in Hulu, the premier online TV Web site. “Without such a remedy, Comcast could, through its seats on Hulu’s board of directors, interfere with the management of Hulu, and, in particular, the development of products that compete with Comcast’s video service,” the Justice Department stated in a news release. NBC and the owners of ABC and Fox all have minority stakes in Hulu. Comcast said it would retain an economic stake in Hulu, and would continue to provide TV shows and movies to Hulu the same way that Hulu’s other minority owners do.

In the complicated transaction, Comcast is buying a majority stake in NBC Universal from General Electric. Over time, Comcast will have the option to buy a larger share of NBC.

In the nearly two years since Comcast began negotiating to buy NBC — the deal was hatched in the spring of 2009 — the media marketplace has shifted considerably as online video viewing has grown in popularity, even as television advertising has rebounded from its recessionary lows.

One result of the consumer tilt toward online video has been the rise of Netflix, which has pivoted from its beginnings as a DVD-by-mail business to a streaming video company. The success of Netflix in changing consumer behavior has raised fears that the heart of Comcast’s business — selling cable subscriptions — could be in jeopardy. To that end, the deal to acquire NBC Universal will give Comcast a significant role in the future of online television viewing.

The F.C.C. acknowledged Tuesday that the deal could create risks “to the development of innovative online video distribution services.” So, in certain cases, Comcast may be required to distribute certain programming on the Internet — if one of its rivals does so first.

Susan Crawford, a professor who is writing a book, “The Big Squeeze,” about the Comcast deal, said that the government was giving online video upstarts several ways to challenge Comcast to gain access to its programming.

“As at many junctures in the history of telecommunications policy, government intervention has made it possible for new media distributors to exist,” she said. “This is the latest intervention to provide daylight — just to open up enough daylight to give this nascent online marketplace a chance to take off.”
Among the other conditions is an arbitration process in the event of disputes between Comcast and other cable providers over access to any of NBC Universal’s cable channels.

“We will be good to our word — and we will be respectful stewards of the strong and iconic assets of NBC Universal, particularly NBC News,” said David L. Cohen, an executive vice president at Comcast, in a letter about the regulatory approvals.

The Consumer Federation of America, which initially opposed the merger, said Tuesday that it thought the government conditions and enforcement measures would protect consumers and provide “additional momentum for the development of the Internet as a platform for video competition.”

Other public interest groups were much more critical. Free Press said the approval failed to live up to “Barack Obama’s promise to promote media diversity and prevent excessive media concentration.”
With the government approvals in hand, Comcast executives can now participate in management decisions at NBC Universal — which they have been champing at the bit to do — though they can not formally lead the company until the deal closes, according to an executive involved in the process.

The deal’s closing will happen after the end of the company’s next pay cycle, which is Jan. 28.

bad mommy...

Omgee...I'm suffering from 'bad mommy' syndrome indeed! Work got crazy, the holidays snuck up with all the anticipated gifts, calories & family visits, and I even became a year older, er, more fabulous! And so I neglected my baby, but don't worry - mommy's back and I'm going to make 2011 the best year yet!!! Omg indeed!!!

xoxox

The chick with cents, aka mommy!