The transaction will enable Cargill to accomplish several important objectives, including maintaining its status as a private company while meeting the diversification and distribution needs of the charitable trusts and foundation formed through the estate planning of Margaret A. Cargill, one of Cargill's largest shareholders, who died in 2006. The transaction also will enhance Cargill's credit profile and ensure that the company's financial results, compensation plans and management focus are fully aligned with the performance of the businesses Cargill directly manages.
The transaction is expected to benefit Mosaic by improving its long-term strategic and financial flexibility, as well as greatly increasing the liquidity of Mosaic's common stock. As a result of the transaction, there will be no change to Mosaic's total outstanding shares, the economic rights of the Mosaic shares or earnings per share. The transaction also is not expected to have any impact on Mosaic's underlying financial performance or current business operations.
In carrying out the transaction, Cargill plans to exchange approximately 179 million of its 286 million Mosaic shares with Cargill shareholders, including the Charitable Trusts, for all or a portion of their Cargill stock. Cargill expects to exchange all of its remaining 107 million Mosaic shares for Cargill debt owned by third parties. Pursuant to a ruling from the U.S. Internal Revenue Service, the transaction is expected to be tax free to Cargill, Mosaic and their respective shareholders. Mosaic, Cargill and the Charitable Trusts have entered into a series of agreements to effect the transaction, including terms intended to provide for an orderly disposition of the Mosaic shares. The transaction is expected to close in the second calendar quarter of 2011.
Jim Prokopanko, Mosaic's president and chief executive officer, said, "This transaction will bring significant benefits to our company and shareholders. Going forward, we will be better positioned to capitalize on the positive outlook for our industry, retain our market leading positions and reinforce our existing competitive advantages. Importantly, there will be no adverse impact to our earnings potential, strong balance sheet or ability to generate cash."
Greg Page, Cargill's chairman and chief executive officer, said, "The transaction will accomplish a number of important business objectives for both Cargill and Mosaic and is in the best interests of both companies. Mosaic has been a landmark investment for Cargill. We are proud of what Mosaic and its employees have accomplished and remain confident in the company and its future. We look forward to continuing our commercial relationship with Mosaic, which strengthens Cargill's ability to deliver high-value solutions to our farm customers around the world."
Mosaic's board of directors formed a special committee consisting solely of independent directors to evaluate and negotiate the transaction. Upon the special committee's recommendation, Mosaic's board of directors has approved the transaction. The transaction is subject to approval by holders of a majority of Mosaic's shares held by non-Cargill shareholders. Cargill's board of directors also has approved the transaction. Cargill retains the right to terminate the transaction subject to payment of a termination fee to Mosaic's minority shareholders under certain circumstances.
Credit Suisse Securities (USA) LLC acted as financial advisor to Cargill, and Fried, Frank, Harris, Shriver & Jacobson LLP provided legal counsel to Cargill. J.P. Morgan Securities LLC acted as financial advisor to the Special Committee of Mosaic's Board of Directors, and Simpson Thacher & Bartlett LLP acted as legal counsel to the Special Committee. UBS Investment Bank acted as financial advisor to the Charitable Trusts, and Loeb & Loeb LLP acted as legal counsel to the Charitable Trusts.
