Mosaic shareholder sues over Cargill plan to sell stake

Mosaic Co., North America's second- largest fertilizer producer, and its largest shareholder, Cargill Inc., were sued by an investor alleging Cargill's plan to sell its64 percent stake in Mosaic for about $24 billion is unfair to minority stockholders.

The deal announced in January will give Cargill more valuable stock and increase its voting power to 89 percent at the expense of minority shareholders, lawyers for the City of Lakeland Employees Pension Plan said yesterday in a complaint in Delaware Chancery Court in Wilmington. The plan asked a judge to bar the transaction.

"As Mosaic's controlling stockholder, Cargill stands on both sides of the transactions and therefore bears the burden of proving entire fairness," lawyers for the pension plan said in court papers. "Cargill cannot meet this burden. The initiation, timing and purpose of the transactions were all to serve Cargill's interest."

Cargill, a Twin Cities-based producer of food, agricultural and industrial products, said in January that it would exchange its 64 percent stake in Mosaic, or 286 million shares, for Cargill stock and debt. The Mosaic shares are to be sold in secondary offerings. The deal is subject to approval by Mosaic's minority shareholders, who will get $200 million if Cargill terminates the transaction.

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Rob Litt, a spokesman for Plymouth, Minnesota-based Mosaic, said the company is aware of the complaint and doesn't comment on pending litigation.

CARGILL ESTATE

The agreement allows trustees of the estate of Margaret A. Cargill, the late granddaughter of company founder William Cargill, to sell all its shares of privately-held Cargill. Cargill will exchange 179 million Mosaic shares for Cargill stock held by Cargill investors. The other 107 million Mosaic shares will be swapped for Cargill debt held by third parties.

Mosaic Chief Executive Officer Jim Prokopanko said the company could be acquired during the two-year process.

A special committee of Mosaic's board failed to obtain a fairness opinion on the transaction and lacked information necessary for an objective evaluation, the pension plan said. Stockholders also won't be able to make an informed vote on the plan because of materially misleading and incomplete disclosures, according to the complaint.

Preliminary reports explaining the deal fail to describe "the degree of voting control that Cargill and the Cargill family may continue to exercise over Mosaic," the pension plan said.

VOTING POWER

Even if Cargill sells off all its shares, the trust and other Cargill stockholders will still control 78 percent of the votes for directors giving them sufficient voting power to elect the entire board. They will also control at least 29 percent of the vote on other matters, according to the complaint.

"Mosaic has been performing well, and the transactions are not necessary to enhance the company's present and future growth prospects and objectives," lawyers for the pension plan said.

Cargill is the largest closely held U.S. company, according to a 2010 ranking by Forbes.com.

The case is City of Lakeland Employees Pension Plan v. Mosaic Co., CA6228, Delaware Chancery Court (Wilmington).