CF Industries Holdings Inc.’s acquisition of Terra Industries Inc. could come in early-to-mid April, according to knowledgeable sources last week. CF’s exchange offer for Terra shares will expire April 2. If 90 percent or more of Terra shareholders tender, then the deal could be concluded very soon. If less than 90 percent tender, however, the close may have to await an official Terra shareholders’ meeting.
>The deal was structured in such a way that CF shareholders do not have to vote on it.
Wall Street was not too kind to CF after the news of the Terra acquisition appeared imminent. CF shares dropped from $100.61 on March 11, before it was announced that Agrium Inc. and Yara International ASA were dropping out of the merger race, to $93.12 a week later on March 18. One industry observer said that CF now has a very big chunk of nitrogen, and it had better hope that natural gas prices remain low.
Agrium, on the other hand, saw its shares go up 5.5 percent, from $66.78 to $70.71, over the same span.
There was a lot of back-and-forth between analysts and industry players mulling the final outcome. While some said Agrium was being rewarded by the stock market for not paying too much for CF, others wondered if it might have been worth it to Agrium to pay up for CF and thereby avoid having a much stronger CF/Terra competitor. Still others said that Yara and Terra were a perfect fit.
In the end, CF got what it wanted and Terra shareholders received a large premium, more than doubling the value of the year-ago share price. The biggest loser might well be the Sioux City Chamber of Commerce, which will lose Terra as the headquarters for a company with annual revenues of $1.6 billion. And with expected synergies of $135 million from the merger, jobs will be lost.
According to a poll conducted by Green Markets last April (GM April 20, 2009), industry respondents were more in favor of a CF/Terra deal than Agrium/CF. Overall, 59.9 percent of respondents said they opposed the Agrium/CF merger, 42.3 percent said they opposed the CF/Terra merger, and 29.6 percent said they were not opposed to either merger. At that time, however, more respondents felt an Agrium/CF deal would be the final conclusion, with 43.7 percent of respondents believing the Agrium/CF deal would be realized, while 23.2 percent said they thought CF would acquire Terra. Overall, 34.5 percent of respondents said they thought neither merger would occur.