5 November, 2009
UPDATE 4-Agrium raises bid for CF, but shares sell off
* Cash-and-stock bid is worth $92.99 per CF share
* CF shares plunge; Terra, Agrium shares up
* Agrium says this is its final offer (Adds CEO comments; All figures in U.S. dollars, unless noted)
By Euan Rocha and Michael Erman
TORONTO/NEW YORK, Nov 5 (Reuters) - Canada's Agrium Inc(AGU.TO) sweetened its hostile bid for U.S. fertilizer rival CF Industries Holdings Inc (CF.N) on Thursday, but the latest maneuver in a drawn-out three-way takeover battle failed to impress CF's investors, and CF shares fell about 8 percent.
Agrium has been pursuing a deal with CF since February, while CF has put in a hostile bid for U.S. rival Terra Industries Inc <TRA.N. Both Agrium and CF have sweetened their bids many times, while their targets have spurned all overtures.
"I don't think Agrium's latest offer is enough and I don't think CF is going to jump at this offer," said Morningstar analyst Ben Johnson. "The deadlock is going to continue, pending the outcome of the Terra shareholder meeting."
Terra on Wednesday rejected a sweetened bid from CF as inadequate. But CF has nominated a slate to Terra's board and a vote is scheduled for Nov. 20. A victory for the CF slate would likely help CF clinch a deal.[ID:nN04543202]
Share price moves on Thursday also suggest that investors are betting on improved prospects of a deal between CF and Terra.
CF's shares dropped $6.73 or 7.8 percent to $79.66, while Terra's stock rose 48 cents or 1.4 percent to $36.02 on the New York Stock Exchange. Agrium shares were up over 4.5 percent in afternoon trade on both the NYSE and the Toronto Stock Exchange.
Agrium's latest offer "does not get it done by any means," said one arbitrage investor who has been watching the deal closely.
The fertilizer sector has been rife with both mergers and rumors since early this year, as the economic downturn has hurt fertilizer demand and pricing, dragging shares lower and making valuations more attractive.
Takeover premiums and the prospect of a recovery in crop nutrient demand have boosted share prices recently, but the shares of North American fertilizer companies are still well below the all-time-highs touched in mid-2008.
REVISED OFFER
Agrium raised the cash portion of its bid by $5 per share and is now offering $45.00 in cash plus one Agrium share for each CF share. This implies a deal value of $92.99 per CF share, or $4.52 billion based on Agrium's closing stock price on Nov. 4.
"This is Agrium's best and final offer. We have addressed all Canadian and U.S. regulatory concerns and are prepared immediately to execute a fully financed, binding merger agreement," said Chief Executive Mike Wilson.
Agrium said its latest offer provides a premium of more than 67 percent to CF's closing price on Feb. 24, 2009, the day before Agrium announced its initial proposal.
CF has repeatedly argued that Agrium's offer is not a serious proposal and is merely a bid aimed at derailing CF's own offer for Terra, but Wilson refuted those allegations.
"What the hell would we be doing here for eight and a half months, if we weren't serious? Why would we be bidding north of $4 billion if we weren't serious? Of course we are serious; CF can say whatever they want," Wilson told Reuters.
Some investors have argued that the $5 bump in Agrium's offer is merely a face-saving exercise on the part of the company, but Wilson argued that Agrium is offering CF shareholders significant value.
"At the end of the day, there are two components to this (hostile takeover battle). One is discipline and the other is patience. And we are going to exercise both," said Wilson.
Dahlman Rose analyst Charles Neivert said CF's investors seemed to be trading as if "the Agrium deal is going to disappear on them."
The arbitrage spread for the Agrium-CF deal, a measure of the difference between a company's share price and the price a buyer is offering, widened sharply on Thursday, indicating heightening investor skepticism on the deal.
On Thursday morning the spread was over $15, or around 19 percent of CF's share price. It was less than 2 percent on Wednesday.
Conversely, the spread for CF's potential purchase of Terra tightened to around 10 percent from 15 percent yesterday. The spread for the Terra deal is now tighter than the spread for the Agrium deal for the first time in months.
"The reaction of the market seems to indicate that no deal will be consummated, either for Terra or for CF," Neivert said in a research note. ($1= $1.06 Canadian) (Editing by Janet Guttsman and Gerald E. McCormick)
Source: http://www.reuters.com
UPDATE 4-Agrium raises bid for CF, but shares sell off Added: (05.11.2009)
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