CF Indus Tweaks Own Fertilizer Bid, Rejects Hostile Offer
March 09 2009 - 2:41PM
Dow Jones News
CF Industries Holdings Inc. (CF) will take its sweetened hostile
offer to shareholders of Terra Industries Inc. (TRA) Tuesday after
rejecting an approach from rival fertilizer maker Agrium Inc.
(AGU).
CF Industries lifted the value of its bid for Terra with a
collar and also increased the forecast synergies from a deal as it
prepared an investor roadshow and proxy battle ahead of Terra's
annual meeting in May.
The move came as CF's board rejected a cash-and-stock approach
from Agrium that it described as "grossly inadequate" and intended
to interfere with its own effort to acquire Terra.
Deerfield, Ill.-based CF Industries said it would now pay $27.50
in stock for each share of Terra Industries (TRA), based on an
exchange ratio ranging from 0.4129 to 0.4539, depending on its own
stock price. This compares with an original ratio of 0.4235.
It is taking the offer on a series of investor roadshows,
starting Tuesday in New York.
Terra shares have climbed sharply since CF made its move Jan.
15, but have remained below the offer price and were recently down
4.3% at $24.96, with CF up 1.2% at $62.30.
Investors haven't ruled out the emergence of a white knight for
Terra.
CF's improved terms were accompanied by an increase in the
forecast annualized synergies to $105 million to $135 million. This
compares with "over $100 million" when the offer was first
made.
The company has nominated a slate of three alternative directors
to the Terra board in an effort to promote its bid.
Agrium's plan to acquire CF, launched on Feb. 25, was contingent
on the Terra offer being dropped. The move was viewed by analysts
as an effort by fertilizer producers to take advantage of the drop
in sector stock prices since last summer to buy up production
capacity ahead of what they see as an inevitable turnaround in
commodity prices.
"When you look at buy versus make, it's the right time to buy,"
Agrium Chief Executive Mike Wilson told Dow Jones Feb. 25.
The combined entity would become the world's fourth-largest
fertilizer producer, with annual sales of around $14 billion, and
enhance Agrium's global presence in products based on nitrogen,
phosphate and potash.
Prices for all three fertilizer ingredients soared last year as
farmers sought to boost crop yields and take advantage of rising
prices for corn, soybeans and wheat, only to see the boom reverse
in August.
CF said Monday that Agrium's move isn't in the best interest of
the company or its shareholders.
Agrium offered about $3.6 billion for CF on Feb. 25 in what
would be a cash-and-stock deal valued at the time at $72 a
share.
The Canadian company hasn't pursued a proxy battle after passing
a deadline to nominate an alternative slate of CF directors.
The CF board can block any exchange offer for the company with a
poison pill.
Agrium shares were up 3.6% at $32.55. The company wasn't
immediately available for comment.
-By Doug Cameron, Dow Jones Newswires; 312-750-4135;
doug.cameron@dowjones.com
(Steve Gelsi contributed to this report.)