CF Industries Holdings Inc. shareholders have been withdrawing their support for Agrium Inc.’s tender. The percentage tendering has gone from 62 percent (GM June 29, p. 1) to 21 percent. Still, Agrium has not given up, saying July 20 that it will extend its offer for CF from July 22 to Aug. 19.
“Agrium remains fully committed to acquiring CF, and as we have previously stated, we strongly believe that combining Agrium and CF will create a terrific company and significant value for stockholders,” said Agrium President and CEO Mike Wilson on July 20. “Despite the fact that CF continues to ignore a clear mandate to conclude a transaction, we will continue to press CF to execute a mutually beneficial merger agreement. Our offer remains far superior to any alternative articulated by CF, including remaining independent or paying a premium for Terra.”
“Agrium has shown by extending its clearly inadequate offer that it is more interested in trying to create a distraction than in making a compelling bid,” a CF spokesman told Green Markets. “The fact remains that Agrium’s offer substantially undervalues the company and is not in the best interest of shareholders. We note that as of last Friday, only about 21 percent of CF Industries shares had been tendered.”
An Agrium spokesman said the company was unable to actually take up the shares, as CF has a poison pill under Delaware law. He said as a result, institutional shareholders can always pull back their shares. He said if there is another tender, the shareholders would submit again.
The 21 percent is down from an earlier 62 percent which gave Agrium the confidence to extend its offer once before from June 22 to July 22. Thereafter, Agrium argued that the 62 percent tender was evidence that CF shareholders were ready to sign on to the deal. CF, however, argued that the shareholders instead were wanting to keep the deal open for another offer, which was never forthcoming.
CF also pointed to significant regulatory concerns about an Agrium/CF deal (GM June 22, p. 1). CF says that Agrium and CF are the only two significant nitrogen manufacturers in Alberta, Canada. It says Agrium is by far the largest producer and distributor of anhydrous ammonia and urea in Alberta, with CF as its only significant rival.
CF also believes that it and Agrium are two of very few producers and distributors of ammonia and urea in Saskatchewan and Manitoba.
CF said Agrium is a significant competitor with CF in the sale and distribution of direct-application ammonia in the Corn Belt and Northern Plains. CF estimates that Agrium has the third-largest distribution network in the Corn Belt, with many terminals located in proximity to CF terminals. In addition, CF says Agrium and CF are the only two operators of ammonia terminals in North Dakota and an isolated area of the Pacific Northwest.
CF believes these concerns will likely gain intensive scrutiny and could require divestitures of significant manufacturing and distribution assets or antitrust litigation to block the offer.
Agrium continues to say it believes there are no material impediments to closing an Agrium/CF transaction, nor are there expected to be any material delays in closing as a result of regulatory review.
The Agrium offer for now remains $40.00 in cash plus one Agrium share per CF share. Agrium shares have been hovering around $40 per share for the past month, making the approximate value of the offer $80 per CF share. While CF has been trading between $70-$75 during the last few weeks, CF shareholder price ideas are believed to be $90-$100 or more. One source close to CF said last week that with the new lower potash prices, the value of Agrium might be slated to fall, making it an even worse deal for CF shareholders. He asked, while Agrium says it can walk away and buy something else, what would they buy that could add more value than CF? In the end, he said Agrium is going to have to pay up or walk away.
In other news last week, CF’s board declared a $0.10 per share dividend on its common stock for the third quarter. The dividend will be payable on Aug. 31, 2009 to stockholders of record as of Aug. 14, 2009.