The year-long fertilizer merger saga may finally be over, and it appears that CF Industries Holdings Inc., which initially started up the race for Terra Industries Inc. in January 2009 (GM Jan. 19, 2009, p. 1), will finally win its prize. On March 10, Terra Industries Inc. said that it viewed CF Industries Holdings Inc.’s latest bid as a “superior proposal” to the one offered by Yara International ASA on February 15. On March 11, Agrium Inc., which has been vying to buy CF, opted out of the race. On March 12, Yara did so as well, saying it would not increase its bid for Terra, thereby letting CF stand as the victor.
CF’s bid for Terra is valued at $4.7 billion, which includes $37.15 in cash and 0.0953 of a share of CF common stock for each Terra share. By comparison, Yara’s bid was $41.10 per share, or $4.1 billion.
The Terra-Yara agreement could be terminated if Terra received a superior proposal and provided advance notice to Yara, and Yara in turn matched the superior proposal within five business days. The deadline for matching this superior proposal will expire by March 17 at 5:00 p.m. New York time. Terra’s termination of the merger agreement makes Yara eligible for a US$123 million break-up fee.
Yara did not wait until March 17. Instead, its board met on March 11, and the company issued a statement March 12. “Terra would be a perfect fit to Yara and attractive at our proposed valuation, but we will not increase our offer that was first accepted by the Terra board. The growth ambition of Yara will be carried out for the future on the same value generating basis as the company has done successfully in the past. U.S. remains an attractive market for us and we will continue to search for opportunities to grow our business in the region. We remain the global leader in the fertilizer industry, and there will be more opportunities around the world to grow our business further,” said Jørgen Ole Haslestad, Yara president and CEO.
As reported last week, one Yara board member had been quoted as saying that Yara would not increase its offer. Yara said last year that it did not want to get into a bidding war for Terra.
“We believe that Terra is worth more to CF Industries than to any other acquirer, given the strategic benefits of the transaction, including synergies, which only CF Industries can achieve,” said Stephen Wilson, CF chairman, president, and CEO, in a statement released March 10. “Any offer from Yara must be heavily discounted for the substantial risks and length of time associated with closing.” Sources saw these comments as meaning that CF was determined not to be outbid. CF said it walked away when it thought Terra was not for sale; however, once it saw that Terra would sell, it was back in the race. CF confirmed that, at Terra’s request, CF has delivered a signed merger agreement to Terra relating to CF’s offer made on March 5.
CF’s determination may have been a major factor in Agrium’s throwing in the towel. “We would like to thank CF stockholders for their support during our efforts to acquire CF,” said Mike Wilson, Agrium president and CEO. “It is unfortunate we could not conclude this transaction, given the strong support shown by both CF and Agrium shareholders. Agrium applies a disciplined approach to employing capital and will continue to focus on the significant growth opportunities available to us globally across the agricultural value chain.”
In addition, Agrium said it will no longer attempt to elect directors to the CF board and it will allow its offer to expire at 12:00 midnight, New York City time, on March 22, 2010.
CF has continually refused to come to the table with Agrium, and Agrium Chief Financial Officer Bruce Waterman told analysts March 10 that the company would not increase its bid for CF without negotiations.