On March 27, in addition to increasing its offer for CF, Agrium filed with the SEC preliminary proxy materials in connection with CF’s 2009 annual meeting of stockholders, which urge CF stockholders to “withhold” all votes in connection with the election of the three nominees to the CF board of directors.
“Agrium’s increased offer reflects our firm commitment to completing this transaction,” said Mike Wilson, Agrium’s president and CEO. “For CF stockholders – who would receive a substantial premium plus significant participation in the upside of the combination – our offer is a far better alternative than paying a substantial premium for Terra Industries. Moreover, we would consider increasing our offer further to reflect any additional value that the CF board and management can demonstrate arising from the combination of our two companies.”
“We do not understand why CF would summarily reject our offer without any attempt to negotiate a mutually beneficial transaction,” added Agrium’s Wilson. “We are disappointed that CF would attack our offer with selective information and flawed financial analysis – and disenfranchise CF stockholders by restructuring the Terra offer to take the vote away from CF stockholders. We urge CF stockholders to send a message to the CF board to engage with us by withholding their votes for the CF nominees at the April 21 annual meeting and tendering their shares into the Agrium offer. Given CF’s end run around CF stockholders, withholding votes on directors and tendering shares is the way for them to have a voice in the future of their company.”
Agrium noted its offer is not subject to a financing condition. Agrium says it has sufficient cash resources and committed financing underwritten by Royal Bank of Canada and The Bank of Nova Scotia to fund the cash portion of the offer.
Agrium also outlined its response to CF’s rejection:
- Agrium’s offer represents a substantial premium and is very attractive to CF stockholders from an exchange ratio standpoint as it is well above historical averages.
- Agrium’s proposal has been well received by the markets. CF stockholders have clearly expressed to Agrium their preference to receive a premium rather than pay a premium for Terra. The spread between the value of the Agrium offer and CF’s share price has averaged 1.8 percent since the announcement, implying that investors are supportive of an Agrium/CF combination and believe a deal will be consummated.
- Agrium’s offer is not being funded by CF’s cash. CF’s contention that Agrium is using CF’s cash to fund the cash component of Agrium’s offer is wrong. Agrium is funding the cash portion of the offer through available liquidity and fully committed financing. More importantly, the cash on CF’s balance sheet is fully valued in Agrium’s offer, as is the case in virtually every merger or acquisition.
- Agrium’s retail business provides stability, value and high margins. While CF claims it does not want exposure to Agrium’s “lower margin” retail business, the fact is that Agrium has had higher average and less-volatile margins than CF – and has traded at a higher EV/EBITDA multiple ?Çô since CF’s IPO in 2005.
- Agrium is a global leader in nitrogen manufacturing with broad diversification. Our operational and geographic diversification helps maintain our strong vendor relationships and mitigates unforeseen events such as unfavorable weather or political instability in the markets we serve. A combined Agrium/CF would further strengthen our market positioning.
- Agrium has a strong record of growth, successful integration of acquisitions and attainment of synergies. In the past five years, Agrium has completed nine acquisitions and invested approximately $3.4-billion, achieving synergies greater than announced and earlier than expected. In contrast, CF has announced a single acquisition of approximately $25-million and has no track record of integrating acquisitions or extracting synergies since its IPO.