Bunge is in talks to sell the mining assets of its key Brazilian fertilizer division to raw materials giant Vale for up to $3.8bn in the latest of a series of shake-ups at the US agribusiness group.

Vale said was considering buying a portfolio of Bunge assets comprising phosphate rock mines, processing plants both for both phosphates and nitrogen nutrients.

The portfolio includes Bunge's controlling shares in Fosfertil, the listed phosphates group. The 42.3% stake, held in part directly and in part through holding company Fertifos, was worth $2.0bn at market values at the close of trading on Thursday.

The announcement comes six months after Vale - the world's largest producer of iron ore and pellets, which also owns aluminium, coal and copper mines – confirmed that expanding into fertilizers was "one of its strategic objectives" after being rumoured to be interested in buying US phosphate and potash group Mosaic.

Real problem

For Bunge, the deal comes amid an overhaul of its Brazilian business, which has been dented by the appreciation of the real.

"With about $1bn in fixed costs denominated in Brazilian real, the appreciation in the currency versus the dollar presents a major headwind for Bunge," Deutsche Bank analysts said in a note on Wednesday.

Pedro Parente, a former Brazilian deputy finance minister, started on Monday in the new post of chief executive of Bunge's operations in Brazil, where it revealed last month that it was spending up to $1.48bn on sugar assets.

Debt burden 

The acquisitions have threatened to get Bunge into even deeper trouble with its ratings agencies, who have voiced concerns over the group's fading operational performance.

Bunge in October cut its target for full-year results for a second time, flagging the troubles at its fertilizer division, which lost $162m in the July-to-September period, compared with a $543m profit a year before.

"Bunge's very weak operating performance… has resulted in key credit measures that are well below our expectations for the company at the current rating," Standard & Poor's said two weeks ago in a report confirming the agribusiness was within a whisper of seeing its debt downgraded to junk.

Analysts believe Bunge ended 2009 with debts of $2.6bn, equivalent to 3.8 times its earnings before interest, tax, depreciation and amortisation, a key metric for assessing leverage levels.

Timing question

Friday's announcement received a cautious welcome from investors, who sent Bunge shares up more than 5% in early deals in New York. They stood 2.5% higher at $69.78 in lunchtime trading.

Rafferty Capital Markets analyst Ian Horrowitz said that, given signs of recovery in the Brazilian fertilizer market, "investors may question the timing of this announcement".

In Sao Paolo, Vale shares stood 0.8% lower at Real46.02, with Fosfertil stock up 8.2% at Real21.86.