Agrium Inc. said June 23 that CF Industries Holdings Inc.’s stockholders have tendered approximately 30.14 million CF shares, or 62 percent of the total outstanding CF shares, into its offer of $40.00 in cash plus one Agrium share per CF share as of the offer’s expiration date at 12:00 midnight, June 22.
Agrium has now extended the expiration date of the offer until 12:00 midnight, New York City time, July 22, 2009.
“CF stockholders have sent a resounding message to CF’s board that they support Agrium’s offer,” said Agrium President and CEO Mike Wilson. “CF stockholders clearly understand that the Agrium offer is far superior to any alternative articulated by CF, including remaining independent or paying a premium for Terra. These are extraordinarily strong results, particularly given that CF’s poison pill and other defense mechanisms are still in place, and we urge CF’s board to respect this clear message from its stockholders.”
Wilson added, “As we have previously stated on many occasions, a combined Agrium/CF would be a terrific company and Agrium is ready to meet immediately with CF and prepared to expeditiously execute a fully financed, binding merger agreement. We appreciate the support shown by CF stockholders and will continue to press forward to complete this compelling combination.”
“Contrary to Agrium’s assertions, the tender offer results do not change the facts that Agrium’s offer substantially undervalues CF Industries, our shareholders do not support the price in the offer, and the offer has significant regulatory issues,” said Stephen Wilson, CF chairman, president and CEO, responded later on June 23.
Contacted June 25, CF Director of Investor and Public Relations Charles Nekvasil told Green Markets that he could not speak for the board, however, to date the position has been that the offer is inadequate to justify a discussion.
Industry sources last week were surmising that the 62 percent tender would likely prod CF into negotiations with Agrium. However, not everyone agreed. One source close to CF downplayed the 62 percent, noting that 2.5 percent of that was already owned by Agrium, and that the company was expecting a larger majority.
There appeared to be three positions on the deal last week. Agrium’s appeared to be two prong. First, CF shareholders tendered on what was Agrium’s last and final offer, so no need for another bid. Second, if the first does not pan out, then Agrium is at least entitled to negotiation since the majority of CF shareholders did tender. As per its earlier argument, there should be no increase in bid unless CF can point to additional value.
The CF view appeared to be that nothing has really changed since the last offer, which remains inadequate. Why go to negotiations until there is a higher bid? One source close to CF said last week that companies do not sit down to actual negotiations until they are a few dollars away from a deal. As for Agrium assertions that it will raise its bid after CF has presented evidence of higher value, he said Agrium did due diligence in 2005 before CF did its IPO. He said it is a small industry and all the players have a pretty good idea of the value of each other, adding that CF has three major assets, Donaldsonville, Medicine Hat, and the Florida phosphate operations, and they are pretty well known.
While the CF board may now be under more pressure to talk to Agrium, the source close to CF said the company is not going to be stampeded, noting that Agrium said the two should “expeditiously execute” an agreement.
RiskMetrics, the advisory firm, had predicted that the most likely outcome would be that CF stockholders would tender, negotiations would occur, then the CF board could “just say no” if it did not like another offer, assuming one was forthcoming (GM June 22, p. 1). RiskMetrics said some CF shareholders thought Agrium was at least in the ball park, but that many were looking for $90-$100 per share. Basically, according to RiskMetrics, CF stockholders wanted to give Agrium the opportunity to make another bid. Early in the game, CF indicated that it thought Agrium could afford to pay over $100 per share with the deal still being accretive to Agrium (GM March 30, p. 1). Agrium countered that it would not overpay.
Others noted last week that what was a premium back when the offer was first made in late February (GM March 2, p. 1) no longer is, as the stock market has stabilized and all fertilizer shares have improved in price. One source said Agrium might have won CF early on if it had offered a big premium back before the sector regained some ground.
In CF-Terra news, CF said June 22 that on June 19 it received a standard, unqualified, “no action” letter from the Canadian Competition Bureau confirming that the Commissioner of Competition does not intend to challenge CF’s proposed business combination with Terra Industries Inc.
“We are pleased with the steady progress we have made in obtaining regulatory clearance of our proposed business combination with Terra in both Canada and the United States,” said Wilson. “We intend to continue to work closely with the Federal Trade Commission to resolve the remaining U.S. questions promptly.”
With respect to a CF-Terra deal in the U.S., CF says the FTC is narrowly focused on the direct sale of ammonia for nonagricultural purposes, a business that represented less than 1 percent of CF’s 2008 total revenues.
CF on June 19 extended the expiration date of its exchange offer for all of the outstanding shares of Terra common stock to Friday, July 10, 2009.
The offer, which was scheduled to expire at 5:00 p.m., New York City time, on Friday, June 26, 2009, has been extended until 5:00 p.m., New York City time, Friday, July 10, 2009. As of the close of business on June 18, 2009, a total of 201,979 shares of Terra common stock had been tendered into the exchange offer. There are about 100 million Terra shares outstanding.