Fertilizer and ag retail giant Agrium says its latest sweetened offer for U.S. fertilizer rival CF Industries will be its last.
Smarting from an unrelated 93 per cent drop in its third-quarter profits (see below), the Calgary company on Thursday announced a new, unsolicited cash-and-stock bid of US$45 plus one Agrium share for each CF share.
The new offer, worth US$92.99 per share based on Agrium’s closing share price Wednesday, is estimated to value CF at about $4.5 billion (all figures US$).
The new bid increases the cash component by $5 per share over Agrium’s previous offer in June. Agrium, at that time, said the company would walk from the transaction if it didn’t get a “compelling majority” of CF shares.
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Nevertheless, Agrium CEO Mike Wilson said Thursday that the new bid “is Agrium’s best and final offer.”
Agrium has “addressed all Canadian and U.S. regulatory concerns and (is) prepared immediately to execute a fully financed, binding merger agreement,” Wilson said.
Given that CF, through its board of directors, “has consistently refused to engage with us, this is CF stockholders’ final opportunity to make it clear to the CF board that they want to receive a premium rather than pay one,” he said.
“CF stockholders must tender their shares by (midnight ET on) Nov. 18 to send an unambiguous message that they want this deal with Agrium at this price.”
Agrium said Thursday it now has a “no action” letter from the Competition Bureau of Canada, conditional on Agrium’s sale of a 50 per cent stake of its urea and ammonia production plant at Carseland, Alta. to another U.S. fertilizer firm, Terra Industries.
That deal also commits the Carseland plant to supply Terra with at least 60,000 tonnes of urea per year for the following five years.
CF’s main Canadian asset is a nitrogen fertilizer production plant at Medicine Hat, Alta., about 240 km southeast of Agrium’s urea plant.
Agrium said it re-filed its notification Wednesday with the U.S. Federal Trade Commission, as required under U.S. antitrust law, and “expects to complete the resolution of regulatory issues in the U.S. shortly.”
Agrium said its new offer means a premium of over 67 per cent to CF’s closing price on Feb. 24, 2009, the day before Agrium announced its first rejected offer, and about 84 per cent to CF’s 30-day volume weighted average price through that date.
As of 5 p.m. ET Wednesday, Agrium said it had tenders in hand for about 8.6 million shares of CF stock.
CF also raising
While it hasn’t yet responded to Thursday’s offer, Chicago-based CF since February has rejected Agrium’s bids, saying they undervalue the company and are an attempt to interfere in CF’s own hostile takeover bids for Agrium’s proposed urea-making partner, Terra Industries.
CF on Tuesday announced it would raise its bid for Terra to $32 cash, plus 10.34 per cent of one CF common share, for every share of Terra.
The offer, valued at $40.61 per Terra share, is a change from CF’s earlier all-stock bids “to provide you with certainty on value as well as closing,” CF said in a letter to Terra stockholders.
Sioux City-based Terra, which has rejected five bids from CF since January, announced Wednesday it would reject CF’s newest bid as well. In a letter to shareholders Thursday, Terra CEO Michael Bennett and chairman Henry Slack called CF’s bid “inadequate and opportunistic.”
“Your board believes that Terra’s premier facilities and assets would cost significantly more to replace than what CF is proposing to pay for Terra,” the letter continued.
The letter also noted that the deal to buy 50 per cent of Agrium’s Carseland plant “would add a strong existing asset to Terra’s production portfolio at an attractive price and contribute accretive earnings in the first year.”
Terra, whose Canadian assets include its own nitrogen manufacturing plant at Courtright, Ont., near Sarnia, faces its shareholders at an annual meeting Nov. 20. CF at that meeting plans to run a slate of three supportive nominees for election to Terra’s board.
Agrium’s Q3
Agrium on Wednesday posted its results for its third quarter ending Sept. 30, having warned in advance that the company expected a substantial dip in earnings compared to its 2008 Q3.
Agrium reported net earnings of $26 million on $1.89 billion in revenues for the quarter, down from $367 million on $3.18 billion in the year-earlier period.
Wilson, in Agrium’s Q3 release, cited “a number of challenges for the entire agriculture and fertilizer sector” such as depressed corn prices through much of the summer, in part due to “excellent growing conditions” across North America.
Those conditions also led to lower sales and applications of crop protection products at Agrium’s retail outlets, the company said.
As well, Wilson said, “uncertainty over global potash pricing continued to result in cautious buying patterns from all customers, although our sales volumes this quarter were more than four times higher than the previous quarter.”
As of mid-October, Agrium noted, progress in the U.S. corn and soybean harvests was 50 per cent behind normal, one of the slowest harvests on record, which could “significantly limit the crop nutrient application window.”
That said, Agrium added that it “sees a significant recovery in demand across virtually all crop inputs starting early 2010, particularly for the retail and potash businesses.”
