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Brazil’s Vale (VALE) has agreed to sell it fertilizer assets to Mosaic (MOS) for $2.5 billion in cash and stock. The price at 15 times trailing-12-month EBITDA (earnings before taxes, interest, depreciation, and amortization) is a good one given the continued challenging fundamentals in the global fertilizer sector. The Latin American fertilizer market is one of the most attractive in the world, which is why Vale was able to do this deal at this price, but supply increases for phosphate in 2017 and 2018 suggest relatively high risk for Mosaic in this deal. The timing is especially good for Vale, which like a lot of Brazilian companies is burdened with a huge debt load and big exposure to the U.S. dollar as the Brazilian real struggles. The point for Vale is to reduce debt and cover debt maturities while the company waits for a sustainable pickup in demand for iron ore. Vale has not been at all aggressive in reducing long-term debt that stood at $29.3 billion at the end of the September quarter of 2016. That debt load is actually up from $25.6 billion in the third quarter of 2015.

Vale CEO Murilo Ferreira has laid out a goal of reducing debt by $10 billion. The Mosaic deal would be a good downpayment on that goal.

Vale is a member of my long-term 50 Stocks portfolio. The ADRs (American Depositary Receipts) are up 141% year-to-date and at today’s close of $7.90 I’d call them overvalued. The 52-week range is $2.13 to $9.34. I like Vale’s position as one of the lowest cost producers of iron ore but given supply scheduled to come on line in 2017-2020, I don’t think the huge gains in the price of iron ore are sustainable. I’d look to get into these ADRs at something more like the 200-day moving average at $5.61.