Agrium Inc. said May 11 that it is substantially increasing its exchange offer to acquire all of the outstanding shares of CF Industries Holdings, Inc. to $85.20 per CF share based on Agrium’s closing stock price on May 8, 2009 ($4.1 billion total). Under the revised terms, CF stockholders would receive $40.00 in cash, an increase of $5.00, or 14.3 percent, in the cash consideration, and one common share of Agrium for each CF share. The increased offer represents a premium of 53 percent to CF’s closing price on Feb. 24, 2009, the day before Agrium announced its initial proposal, and 68 percent to the previous 30-day volume weighted average price.
“This substantial increase in cash, along with Agrium’s strong and diversified business profile, provides CF stockholders with a very attractive opportunity and reaffirms our commitment to acquiring CF,” said Agrium President and CEO Mike Wilson. “Given an increase of over 25 percent in the cash component since our initial offer, we believe more than ever that our bid delivers far superior value for CF stockholders compared with any alternatives articulated by CF, including remaining independent or paying a premium for Terra Industries.”
“As part of our continuing efforts to negotiate a mutually beneficial transaction with CF, we again attempted in recent days to meet with CF’s management and financial advisors to discuss a transaction at a substantially higher price. CF has repeatedly rebuffed our efforts to meet, leaving us no choice but to take our increased offer directly to CF stockholders. It is time for CF stockholders to tell the CF board to come to the table.”
Agrium’s offer is not subject to a financing condition. Agrium says it has sufficient cash resources and committed financing underwritten by Royal Bank of Canada and The Bank of Nova Scotia to fund the cash portion of the offer.
Agrium also announced that it has extended the expiration date of the exchange offer until 12:00 midnight, New York City time, June 15, 2009. The exchange offer was previously set to expire at 12:00 midnight, New York City time, on Tuesday, May 19, 2009.
As of midnight, New York City time, on May 8, 2009, Agrium said approximately 1.27 million shares of common stock of CF had been tendered in and not withdrawn from the exchange offer.
On May 11, CF confirmed that it had received another revised proposal from Agrium. It said its board of directors will evaluate the revised proposal carefully in the context of CF’s strategic plans to create shareholder value, including its proposed business combination with Terra.
CF noted that since Feb. 24, the day before Agrium made its initial offer, there has been an increase of 31.5 percent in the average stock price for the peer group. Agrium’s new proposal has a nominal value of $85.20 per share, which is an increase of 18.3 percent over the $72 per share nominal value of its initial offer. With its latest revision, Agrium has changed its initial offer by increasing the cash portion by a total of $8.30 per share, or 11.5 percent of the nominal value of that offer, according to CF.
By Friday morning, May 15, there had been no word from CF accepting or rejecting Agrium’s May 11 offer, which in itself was news. CF rejected Agrium’s last offer on March 29 as “grossly inadequate” soon after it was made on March 27. This may indicate CF is more serious about this offer. One source told Green Markets last week that more cash was attractive and it might be making management think a little harder.
Still, Agrium’s Mike Wilson was quoted after this past week’s Agrium shareholders meeting as telling the Canadian press that an Agrium-CF deal was far from certain. He cautioned that even if Agrium had 51 percent of the support of CF shareholders, that that would not necessarily bring CF management to the table.
In the meantime, on May 8 Terra filed proxy information for a shareholders meeting with the Securities and Exchange Commission. However, it left the date of the shareholders meeting blank. As of May 14, the company said it had not set the date. Conceivably, under its updated bylaws it could wait until Dec. 31, 2009, to have its meeting. CF is hoping to elect three of its own candidates to the Terra eight member board at the shareholders meeting.
In other Terra news, on May 11, SAC Capital Advisors and affiliates associated with hedge fund investor Steven Cohen filed a Form SC 13D with the SEC indicating that it now owns 5.2 percent of Terra. According to the form, the group expended $131.6 million to buy 5,150,500, or 5.2 percent, of Terra’s common shares. The group said the purchase was for investment purposes and not with the purpose nor with the effect of changing or influencing the control or management of Terra and without any agreement with any third party to act to take over Terra.
Most of the Cohen shares were purchased this year, according to Barron’s, which put SAC’s fourth quarter 2008 holding in Terra at only 380,200 shares.
SAC is a $16 billion, 800 employee group of hedge funds founded by Cohen in 1992. It is incorporated in Anguilla, British West Indies, and has offices in Stamford, Conn., and New York City, with satellite offices around the world. According to its website, it began with 9 employees and $25 million in assets under management. The company has invested in other fertilizer companies in the past, including The Mosaic Co.