In a three-step deal years in the making, Cargill plans to shed its 64 percent stake in Mosaic, or 286 million shares worth some $24 billion, to Cargill's shareholders and debt holders.

The spin-off comes after Mosaic explored a sale over the past two years, although no deal materialized, sources told Reuters.

"If there were a $120 (per-share) deal on the table it probably would have been announced," said one arbitrage investor, who spoke on the condition of anonymity.

The market consensus Wednesday was that the deal with Cargill perhaps was not the best option for minority Mosaic shareholders. Some Mosaic shareholders will be required to hold the stock for at least 30 months as part of the complex deal.

Moving quickly to drop the stock, investors sent Mosaic shares down nearly 7 percent.

"What at first appeared to be a great near-term opportunity has been structured in such a way that any corporate buyer would have to be very patient," said Ambrian analyst Nick Mellor.

Another factor weighing down shares could be the fact that, even though the deal is not technically dilutive to Mosaic, more than 100 million shares could hit the market over the next 15 months.

TAX-FREE FOR CARGILL

Cargill, a privately held company that supplies grain and meat to some of the world's largest food companies, said the tax-free deal helps it remain private and gives cash to its charitable trusts.

"You might want to call it a very convoluted way of doing a secondary (offering)," Dahlman Rose & Co. analyst Charles Neivert said. "By the same token, Cargill's doing a great deal."

The deal limits Mosaic's ability to declare special dividends and pursue share buybacks for the next two years, but does not limit the company's ability to use its $3 billion in cash, Mosaic executives said.

The deal also removes a hindrance to listing on the S&P 500 index, Mosaic CEO Jim Prokopanko said. The company has no plans to pursue listing on the Toronto Stock Exchange, despite numerous fertilizer assets in Canada, he added.

Mosaic's shares fell $5.90, or 6.9 percent, to $79.17 in midday trading. They have traded between $37.68 and $85.45 in the past 52 weeks.

Volume was brisk, with about 9.6 million shares trading hands, contrasted with an average trading volume of about 4.5 million shares.