UPDATE:CF Industries:Agrium Could Afford $100/Share On Takeover
24 March 2009 - 2:38AM
Dow Jones News
CF Industries Holdings Inc. (CF) said Monday that fertilizer
rival Agrium Inc. (AGU) could afford to price its hostile takeover
bid at more than $100 a share, reiterating its rejection of a lower
offer.
CF's board called on shareholders to reject Agrium's offer of
$31.70 in cash and 1.7866 of its own shares for each CF share.
There is also a cash alternative of $72 per share.
The Illinois-based company also continued its own hostile
pursuit of Terra Industries Inc. (TRA), sweetening its all-stock
offer by around 11% to $30.50.
CF shares were up 3% at $69.75 in mid-morning trade, with Terra
up 3.7% at $27.58. Agrium's stock was 5.1% higher at $38.11.
The jockeying for position in the industry comes as fertilizer
producers look to take advantage of the drop in sector stock prices
since last summer to buy up production capacity ahead of an
expected rebound in prices.
Steve Wilson, CF's chief executive, said on the call that
industry pricing has improved since the final quarter of 2008.
CF declined to comment on whether it had held talks with Agrium,
which is seeking to break up the proposed CF-Terra combination.
Agrium was unavailable for comment, but one analyst said that
CF's sweetened offer for Terra risks increasing the
"disenchantment" of its own shareholders and could work in Agrium's
favor.
"The more that CF pays for Terra the worse it is for CF
shareholders and the more attractive Agrium's offer becomes," said
Raymond Goldie of Salman Partners in Toronto.
He said CF shareholders could follow the lead of HudBay Minerals
Inc. (HBM.T) shareholders, who were angry at their company's
proposed takeover of Lundin Mining Corp. (LUN.T) and revolted
against management.
A shareholder vote to oust the Lundin board is scheduled for
this week.
CF is looking to nominate a slate of three directors at Terra's
upcoming annual meeting, scheduled to be held by May 15.
In a complex three-way tussle, CF executives railed against
Agrium's offer Monday, criticizing its integration efforts in
previous deals and claiming it was trying to buy its rival on the
cheap at the bottom of the market.
On a conference call, Wilson said their advisers suggested
Agrium could afford to pay in excess of $100 a share and still keep
a deal accretive, based on forecast synergies of $150 million.
CF also criticized the "vagueness" of its suitor's claims for
revenue and cost gains from a deal that create would the world's
fourth-largest fertilizer producer, with annual sales of about $14
billion.
-By Doug Cameron, Dow Jones Newswires; 312-750-4135;
doug.cameron@dowjones.com
(Andy Georgiades contributed to this article)