“EuroChem” announced that it is buying a controlling stake (50% plus 1 share) in Brazilian Fertilizantes Tocantins – the company, which is engaged in the blending and distribution of fertilizers and is a leading participant in this market in the country. The transaction is expected to close in 2016. Its financial terms were not disclosed.
The purchase will strengthen the presence of “EuroChem” in the market of mineral fertilizers in Latin America. “EuroChem” are counting on the experience of the Fertilizantes Tocantins, its production capacity and established relationships with 2,000 clients. The main owner of the Fertilizantes Tocantins Jose Eduardo Motta will retain “a significant stake” and will continue to engage in operational management and be responsible for strategic business development as Chief Executive Officer.
Fertilizantes Tocantins is working in the North, Northeast and Midwest of Brazil, and at the end of 2015 it shipped about 740 000 tons of mineral fertilizers. The purchase of Brazilian distributor will allow “EuroChem” to greatly expand the range of products for local farmers. “EuroChem” already owns one Brazilian distributor which is called “Eurochem Comercio de Produtos Quimicos”. In addition, “EuroChem” has distributors in USA, France, Singapore, Spain, Italy, Germany, Mexico, Turkey, China, and Ukraine. From $4.54 billion earned by the company in 2015 Latin America revenue accounted to $370,5 million. Throughout 2015 the demand in Brazil has been weak due to the devaluation of local currency (real) and high interest rates. This circumstance, as well as significant inventories of fertilizers significantly reduced prices in this market.
It’s a small deal considering the scale of “EuroChem”. Acquisition of distributors in Latin America seems to be a trend of recent times: such transactions were made by the Norwegian Yara, the American Mosaic. For “EuroChem” this transaction will be the step towards strengthening of tis distribution, opportunity to capture market share in the region with growing demand. In the Fall of 2015, “EuroChem” acquired U.S. distributor of Ben-Trei for $34.8 million to get direct access to consumers and expand its presence in the United States. And in January 2016 it entered into a distribution agreement and sales with another US company – Agrinos.
Main beneficiaries of the EuroChem Group activities are Andrey Melnichenko and Dmitry Strezhnev.