The ongoing merger saga of Agrium Inc., CF Industries Holdings Inc., and Terra Industries Inc. intensified last week as Terra shareholders move closer to a Nov. 20 meeting date in which CF will try to elect three members to the Terra board.
CF started the week off on Nov. 1 by offering to acquire Terra for $32.00 in cash and 0.1034 of a share of CF common stock for each Terra share (including the $7.50 per share special dividend declared by Terra). CF said the offer has a value of $40.61 per share, based on the Oct. 30 closing price for CF common stock. The offer, which is equivalent to a multiple of 7.1 times trailing 12-month EBITDA, represents a premium of 28 percent to Terra’s closing price on Oct. 30 and a significantly higher premium to the price at which Terra shares would have traded without takeover speculation. Morgan Stanley committed $2.5 billion to provide the funds required for the transaction. The transaction is not subject to a financing condition or to the approval of CF Industries stockholders.
CF changed tactics by offering the bulk of its offer in cash versus the previous offer of stock. Overall, the result appeared to be an approximate $1.90 increase in price per share. “The substantial cash in our offer makes the combination far more accretive for CF Industries stockholders, while providing certainty on value and closing for Terra stockholders,” said Stephen Wilson, CF chairman, president, and CEO. “The transaction is clearly in the best interests of our respective stockholders.”
On Nov. 4, Terra said its board unanimously rejected the new offer, saying it significantly undervalues Terra’s near-term and long-term prospects. “CF’s latest proposal fails to appropriately value Terra’s world class assets, strategic advantages and prospects,” said Terra President and CEO Michael Bennett. “Terra is a preeminent pure play nitrogen company, and through the continued execution of our strategy is well positioned to take advantage of an upsurge in demand from our agricultural and industrial customer base as the economic recovery continues.”
Still, Terra left the door open to another offer. “Terra’s board has a proven record of building Terra’s market position and delivering shareholder value,” said Henry Slack, Terra board chairman. “Terra’s board and management team always have and will continue to remain open to considering any bona fide opportunity to create meaningful value for Terra shareholders.”
CF responded to the Terra rejection by saying it has made a full, fair, and compelling offer that provides Terra stockholders with certainty of value and closing. CF said it is confident that Terra stockholders will show their support for its offer by voting for CF’s nominees at Terra’s annual meeting.
Not to be outdone, on Nov. 5 Agrium Inc. increased its exchange offer to acquire all of the outstanding shares of CF to $92.99 per CF share based on Agrium’s closing stock price on Nov. 4, 2009. CF stockholders would receive $45.00 in cash, an increase of $5.00, or 12.5 percent, and one common share of Agrium for each CF share.
Agrium says the offer provides a premium of over 67 percent to CF’s closing price on Feb. 24, 2009 – the day before Agrium announced its initial proposal – and about 84 percent to CF’s 30-day volume weighted average price through that date. Agrium says the offer represents a compelling multiple based on CF’s 2010 “owned” EBITDA, particularly in relation to CF’s historical trading multiples, and that this is its best and final offer.
Agrium has extended the expiration date of the exchange offer until midnight, New York City time, on Nov. 18, 2009, just two days before the Terra annual meeting.
Agrium says it has entered into a consent agreement with the Canadian Competition Bureau and has received a “no action” letter from the Bureau. Under the agreement, Agrium will sell 50 percent of its Carseland, Alberta, plant to Terra and also supply a minimum of 60,000 mt of urea per year to Terra for five years. Agrium says it has satisfied regulatory hurdles in Canada and expects to complete the resolution of regulatory issues in the U.S. shortly.
On Nov. 6, CF rejected Agrium’s latest offer, saying it continues to substantially undervalue the company. “Agrium’s latest revised offer is very far from compelling,” said CF’s Stephen Wilson. “Our board and management team are committed to delivering superior value to our stockholders. We have a long history of generating value for our stockholders and we will continue to execute our long-term strategy, including the company’s offer to acquire Terra Industries.”