Agrium ramped up its efforts to acquire CF Industries on April 7 by taking out a full-page ad in the Wall Street Journal, telling CF stockholders in big, bold letters that “now is the time to send a message to CF’s board and management.”
The ad, on page C5 of the April 7 edition, is an open appeal to CF stockholders, urging them to “withhold your vote for CF’s three director nominees on April 21.” It then supplies a litany of reasons for supporting the merger, while charging that the CF board “has refused to engage with us on your behalf” and “has taken away your vote.”
Beneath a banner touting its offer of $35 in cash plus one Agrium share for each CF share, Agrium once again stresses that the offer is a “substantial premium” for CF shareholders. “Based on our closing price on March 26, 2009, the day before we raised our offer for CF, this offer is a 35 percent premium to CF’s closing price on February 24, 2009, the day before we announced our initial proposal – and a 48 percent premium to CF’s 30-day volume weighted average price through that day,” the ad states. “You get the best of both worlds – a substantial cash premium at closing plus shares in a well positioned company with a track record of growth, successful integration of acquisitions, and attainment of synergies.”
The ad then starts finger-pointing at the CF board. “Despite this substantial premium ?Çô and our public statement that we would consider increasing our offer further to reflect any additional value that CF can demonstrate – CF’s board has summarily rejected our offer,” it states. “We are left with no choice but to take our offer directly to you – but you need to act now!”
In the ad, Agrium says it believes “CF’s board knows CF’s stockholders would choose Agrium’s offer over CF’s offer to acquire Terra Industries. After all, wouldn’t you want to receive a substantial premium rather than pay one? That’s why CF restructured the Terra offer to take away your right to vote on the CF/Terra combination.”
Agrium then advises CF stockholders to “protect your interests” by “withholding votes for CF’s directors at CF’s annual meeting on April 21,” stressing that this is “the way for you to send a strong message to CF’s board that they should engage with us to get value for you.” The ad concludes with a “time is short, so vote today” message, providing telephone numbers for Agrium’s proxy solicitor, Georgeson Inc.
On April 6, one day before the WSJ ad, Agrium announced that it had filed its definitive proxy statement with the Securities and Exchange Commission and was mailing a letter to CF stockholders urging them to vote the green proxy card and withhold votes for CF’s three director nominees. “Agrium is initiating a withhold vote to allow CF stockholders a say in the future of their company, which CF is intentionally denying them,” said Mike Wilson, Agrium’s president and CEO.
CF responded on April 9 by releasing its own letter to stockholders, reminding them that the CF board remains committed to “delivering value to stockholders,” and it is because of this that they have rejected Agrium’s offer.
“Agrium’s offer is grossly inadequate ?Çô nothing Agrium says changes that,” the CF letter states. “We believe that, even absent Agrium’s offer, CF Industries shares would be trading well over $60 per share. Given this, Agrium’s offer with a nominal value of $75 (and lower trading value) is at a very low premium, particularly since it is almost half in cash. Recent premiums for cash transactions are nearly 90 percent and premiums for stock transactions are close to 35 percent.”
The letter charges that if Agrium were serious about acquiring CF, it would have made a credible offer rather than one at a very low premium; it would have put up its own slate of directors for election rather than letting the date pass for making nominations; and it would not have acquired a toehold
stake in CF stock, “the only purpose of which could be to cover the expenses of a failed acquisition attempt.” CF said these and other actions “suggest that Agrium is more interested in derailing our proposed business combination with Terra Industries than in acquiring CF Industries for anything other than a bargain price.”
The letter, signed by CF Chairman, President and CEO Stephen R. Wilson on behalf of the CF board, also touts CF’s performance in recent years. “Since our IPO less than four years ago, our stock has risen over 350 percent, and we have been the best performing stock in our peer group,” the
letter states. “BusinessWeek just ranked CF Industries second among the 50 top performing S&P 500 companies measured over a three-year period. We returned $500 million of cash to our stockholders through an accelerated stock repurchase just this past fall, and we continue to pursue value-enhancing strategic initiatives such as our KEYTRADE investment, our project in Peru and our proposed business combination with Terra Industries.”
While the two companies continued their war of words, some industry participants were becoming more vocal in their opposition to any of the proposed megers. The Agricultural Retailers Association, in a carefully worded statement on April 3, said it was responding to a “high percentage of ARA board members” who expressed concerns in an independent third-party survey on crop nutrient producer consolidation. ARA said it was responding with “educational efforts to ARA membership” about how to register their opinions with the appropriate federal agencies and officials.
“It remains unclear what effects further concentration, control and consolidation within the (crop nutrient) industry will have on (crop nutrient) prices, distribution access, transportation costs and competition in key marketplaces throughout the United States,” ARA said. The statement then gives an overview of U.S. antitrust laws, but cautions members that “antitrust laws are concerned with the functioning of the marketplace – i.e. competition, and NOT protection of any individual competitor.”
The statement provides a list of “options for ARA members,” including contact information for, and instructions on how to register comments with, the Federal Trade Commission and the Department of Justice’s Antitrust Division. The statement also advises members to contact their representatives in Congress “to voice an opinion regarding any potential merger within the agricultural industry.”
Given its varied membership, however, ARA stopped short of adopting its own position on the “fertilizer wars,” as some national publications and at least one dedicated website (www.fertilizerwars.com) have dubbed the Agrium-CF-Terra battle. “Please know that any ARA member contacting the FTC, DOJ, or Congress is a voluntary action on the part of your company or individual employees,” the statement concludes.
Green Markets is conducting its own survey of industry participants about the proposed mergers, and will publish the results when responses are tallied. For more information and/or to register your opinion.