Suit: Cargill’s Sale of Mosaic Shares Unfair

A Florida pension plan claims that Cargill's sale of its stake in The Mosaic Company is unfair to minority shareholders because it reduces their voting power.

The City of Lakeland Employees Pension Plan-a minority shareholder of The Mosaic Company-has sued The Mosaic Company and Cargill, Inc., claiming that Cargill's sale of its 64 percent stake in Mosaic is unfair to minority shareholders.

The Florida-based pension plan filed the lawsuit on Monday in Delaware Chancery Court in Wilmington.

Cargill announced in January that it would spin-off its 64 percent, $24.3 billion stake in Plymouth-based Mosaic-a move that will free up cash for Cargill's family foundation while enabling it to remain a private company.

Specifically, Wayzata-based Cargill plans to swap 179 million Mosaic shares for Cargill stock held by Cargill investors, and the other 107 million Mosaic shares will be exchanged for Cargill debt held by third parties. Mosaic shares will then be sold in secondary offerings-and the company will become fully independent for the first time.

The City of Lakeland Employees Pension Plan claims that the complicated transaction is “not entirely fair” because it would give Cargill more valuable stock and increase its voting power to 89 percent. Mosaic's minority stakeholders, meanwhile, would see their voting power decrease from 36 percent to 11 percent.

The pension plan also claims that information disclosed to Mosaic shareholders by a special committee-which was formed to determine if Cargill's sale would “be fair to and in the best interest of Mosaic shareholders”-was unclear and “flawed.”

According to court documents, the committee stated that it relied on financial advice from two financial firms-J.P. Morgan Securities and Lazard Frres & Company-but did not disclose the specific advice that they provided. The committee also did not disclose the amount or method through which the financial firms were being paid for their services, the documents said.

In addition, the court documents allege that the committee failed to disclose information or advice about the potential impact that Cargill's sale could have on the market price of the Mosaic's shares.

Even if Cargill sells all of its retained shares, its stockholders would still control 78 percent of the votes for directors at Mosaic, giving the company total control of Mosaic's board, the suit said.

The pension plan is requesting that the court enjoin Mosaic and Cargill from moving forward with the transaction.

Mark Isaacson, in-house corporate counsel at Mosaic, said that allegations made in the complaint are without merit and the company plans to defend them and any other suits that may arise addressing the same issues.

Cargill spokeswoman Lisa Clemens told Twin Cities Business on Wednesday afternoon that the company has a policy in which it does not comment on pending litigation.

Cargill is Minnesota's largest company based on revenue, which totaled $107.9 billion in fiscal 2010. Mosaic Company is Minnesota's 12th-largest public company based on revenue for the fiscal year that ended in April, which totaled $6.8 billion.