Chemical industry news : Norwegian chemical company Yara has agreed to acquire a fertilzer complex in Cubatao from mining company Vale for an enterprise value of $255 million to establish as a nitrogen producer in Brazil.

The transaction is expected to boost the production footprint of Yara besides complementing its existing distribution position.

For Vale, the proceeds from the sale will bring down its debt and is in line of its strategy of divesting its non-core assets and create shareholder value by consolidating the company’s balance sheet.

The fertilizer complex in Cubatao, named as Vale Cubatao Fertilizantes, is a nitrogen and phosphate complex. It has an annual production capacity of around 200 kilotons of ammonia, 600 kilotons of nitrates along with 980 kilotons of phosphate fertilizer.

Commenting on the Yara acquisition of the Vale Cubatao Fertilizantes complex, Svein Tore Holsether who is the President and CEO of Yara, said: “I am pleased to announce this agreement, which will bring nitrogen production assets into our growing portfolio in Brazil, strengthening both our industrial and fertilizer production and sales.

“The nitrogen assets have a strong competitive position, as Brazil is a net importer of nitric acid and nitrates. This deal is an important step towards establishing a more complete position in Brazil, strengthening our position as a long-term competitive industry player, committed to developing and investing in Brazilian agriculture and industry.”

About 970 permanent and 930 contracted employees work at the Cubatao fertilizer complex.

For the ammonia production, natural gas feedstock is procured from local suppliers. An import terminal, which is not part of the deal, and located near the complex supplies additional ammonia, sulphur, phosphate rock and other raw materials for the complex.

Last year, the Cubatao Fertilizantes complex had sales close to 1.3 million tonnes of nitrogen and phosphate products. These included 2.5 million tonnes of CO2 and other intermediate products.

The pro-forma net revenue of the Cubatao Fertilizantes complex in 2016 was $413 million.

Yara intends to upgrade the Cubatao fertilizer complex by investing around $80 million up to 2020. This is expected to help the Norwegian chemical company to realize annual synergies of $25 million by streamlining its cost, asset and product portfolio.

Subject to clearance from relevant competition authorities and receipt of regulatory approvals, the transaction is anticipated to be closed in H2 2018. It will also be based on a third party not exercising its right of first refusal by the year end.

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  Brazil, Cubatao, Fertilizer business news, Vale, Yara