UPDATE: Agrium Targets CF Industries; Would Break Terra Bid
February 25 2009 - 9:49AM
Dow Jones News
Agrium Inc. (AGU) made a proposed $3.6 billion offer for rival
CF Industries Holdings Inc. (CF) in a move that could break up its
target's hostile bid for Terra Industries Inc. (TRA).
The Canadian company said it would offer the equivalent of $72 a
share in cash and stock for its smaller competitor, adding that
this was fully financed and contingent on CF dropping its pursuit
of Terra.
Calgary-based Agrium said it had first approached CF in 2005,
but its move also signals that valuations in the sector may have
bottomed after a dramatic spike and relapse over the past 18
months.
Deerfield, Ill.-based CF had no immediate comment. The company
launched a proxy battle and an all-stock tender for Terra on Feb.
23 after its unsolicited offer was not accepted by its target's
board. The offer expires May 15.
Investors in the fertilizer sector have seen a boom-and-bust
cycle over the past 18 months, with stock prices doubling on
soaring demand and prices before commodity markets reversed course
from record highs in mid-2008.
CF acknowledged antitrust issues in its own pursuit of Terra,
although it said these could be overcome.
Agrium said it would offer one of its own shares and $31.70 in
cash for CF, creating a company with annual revenues of $14
billion.
The terms represent a 30% premium over CF's Monday close, but
after climbing as high as $66.58 earlier, the stock was recently up
14% at $63. CF shares peaked last year at $172.99.
Agrium shares were down 8% at $37.16 and Terra was off 2.4% at
$24.31.
Agrium said adding CF's strong North American nitrogen,
phosphate and extensive crop-nutrient-distribution assets to its
own global wholesale and retail capabilities "would greatly enhance
our existing portfolio and enable us to create a premier global
franchise across the entire agricultural value chain."
The company said the combined entity would be a leader in
nutrient production and distribution, adding that it expects to
realize substantial annual operating synergies of about $150
million from the combination within three years of closing.
The proposal isn't subject to a financing condition, Agrium
added, noting that it has sufficient cash resources and committed
financing to fund the cash portion of the proposal.
Agrium is hosting a conference call at 10.30 a.m. EST.
-By Doug Cameron, Dow Jones Newswires; 312-750-4135;
doug.cameron@dowjones.com
(Carolyn King contributed to this report.)