| Producer | Symbol | Price | Ago Week | Ago Year |
| Agrium | AGU | 50.48 | 46.86 | 100.13 |
| CF Industries | CF | 82.84 | 79.46 | 151.09 |
| Intrepid Potash | IPI | 32.93 | 33.25 | 58.47 |
| Mosaic | MOS | 56.33 | 53.68 | 149.63 |
| PotashCorp | POT | 117.88 | 114.79 | 223.10 |
| Terra Industries | TRA | 27.78 | 27.30 | 47.68 |
| Terra Nitrogen | TNH | 111.05 | 121.21 | 128.86 |
| Distribution/Retail | ||||
| Andersons Inc. | ANDE | 30.70 | 28.22 | 37.57 |
| Deere & Co. | DE | 45.08 | 46.42 | 79.00 |
| Scotts | SMG | 36.36 | 34.23 | 24.91 |
All posts by traceybg@gmail.com
SPOT BARGE PRICES
Agrium says offer is best and final price; FTC seeks info from CF re Terra
Agrium Inc. said June 3 that its offer to acquire all of the outstanding shares of CF Industries Holdings Inc., for $40.00 in cash and one common share of Agrium for each CF share, is Agrium’s best and final price absent engagement by CF and demonstration of additional value.
Based on Agrium’s closing stock price on June 2, 2009, the offer has a current value of $89.01 per CF share and represents a premium of 60 percent to CF’s closing price on Feb. 24, 2009, the day before Agrium announced its initial proposal, and 76 percent to the 30-day volume weighted average price through that date.
“Agrium is prepared to execute immediately a fully financed, binding merger agreement, but CF stockholders must send an unambiguous message to CF’s board by tendering their shares into our offer,” said Agrium President and CEO Mike Wilson. “If we receive a compelling majority of shares tendered into our offer, we will continue to press CF to engage.
“Our current offer provides full value for CF shares and is far superior to any alternative articulated by CF, including remaining independent or paying a premium for Terra. We note that the majority of long-term stockholders – including Growmark, the stockholder most familiar with CF – have recently sold CF shares at prices well below our offer. In fact, 14 of CF’s top 15 stockholders prior to our bid in February have dramatically reduced their holdings, a clear signal that they disagree with CF’s views on valuation and are voting with their feet,” Wilson continued.
“If we fail to receive a compelling majority, we will conclude we do not have sufficient support from CF stockholders and will walk from the transaction.”
Agrium has extended the expiration date of the exchange offer until 12:00 midnight, New York City time, on June 22, 2009, from June 15, 2009. As of midnight, New York City time, on June 2, 2009, approximately 1.49 million CF shares had been tendered into the offer. As of March 31, 2009, there were 48.4 million CF shares outstanding.
Agrium’s assertions regarding Growmark Inc. were denied by both CF and Growmark. On June 4, Growmark CFO Jeff Solberg said the company has not sold any shares of CF for nearly one year (when the price exceeded $150 per share) and continues to hold more than 1.5 million shares of CF stock. He said any historical sales of CF stock were the result of a well-considered set of factors relating to the valuation of the company, the industry, the overall stock market, and internal corporate considerations that continue to guide Growmark’s actions. Growmark, which has a seat on the CF board and is a major customer, has recused itself from Agrium-CF deliberations and said it had nothing more to say on the matter.
Agrium noted that while Growmark may not have actually sold the stock, that on May 8, 2009, Growmark filed an SEC Form 144, the Notice of Proposed Sale of Securities, indicating that it planned to sell stock and that the approximate date of the sale of the stock was also May 8. The Form 144 indicated that 1,510,403 shares were tentatively to be sold, with an approximate value of about $75.10 per share. According to the SEC, Form 144 must be filed as notice of the proposed sale of restricted securities or securities held by an affiliate of the issuer in reliance on Rule 144. Notice on the Form is only required when the amount to be sold during any three-month period exceeds 500 shares or units, or has an aggregate sales price in excess of $10,000. The sale must take place within three months of filing the Form and, if the securities have not been sold, an amended notice must be filed.
As a result, it does not necessarily mean that shares will actually be sold. One observer told Green Markets that Growmark was likely just trying to provide some flexibility and keep its options open.
CF also noted last week in a presentation before RiskMetrics Groups ISS Governance Services, a proxy advisory firm, that its largest shareholder, TPG Axon, has increased its CF shares to over 5 percent, which it continues to hold. CF noted that another shareholder, Greenlight Capital, sold its shares prior to the Agrium offer. It said it was the second time that Greenlight has come in and out of CF stock since the IPO, and that each time it made substantial profits.
As to Agrium’s assertion that 14 of CF’s 15 largest shareholders have sold stock, CF reiterated that it has a “solid base of fundamental shareholders.” CF said that it has remained in constant contact with its shareholders, and that shareholders owning a substantial majority of CF stock support the view of CF and its advisors.
CF told RiskMetrics that Agrium’s current offer equates to approximately 6.1 times EBITDA. It said that the most relevant precedent was the Yara International ASA acquisition of GrowHow, which was at 8.2 times EBITDA. Further, CF said nitrogen is a commodity chemical, and that the global average commodity chemical transactions in the past decade have been about 8 times EBITDA. It said currently global unaffected peers are trading at 8.7 times 2009E EBITDA.
In addition, CF noted that a lot has changed since Feb. 24 regarding the share prices of peer companies. It noted that through June 1, the global unaffected peers are up 56 percent; Global Basic Materials, up 54 percent; Global Metals and Mining, up 50 percent; Global Chemicals, up 34 percent; and WTI Oil Spot, up 75 percent.
CF said that as of June 1, CF shares closed at $80.31. Based on the June 1 environment, it believes CF shares would likely settle in the mid-to-upper $70s range if Agrium were to withdraw its offer.
Agrium’s Mike Wilson downplayed the run-up in stock prices, as well as CF’s value minus an Agrium offer, telling analysts June 3 at the Goldman Sachs Basic Materials Conference that Agrium thinks CF is worth $65 per share on an unaffected basis, even with the industry hype. Citing a 59 percent increase in peer company stocks, he said that much of the run-up is due to industry hype and speculation about these and other takeovers. “Apparently BHP is going to buy Mosaic and PCS tomorrow,” he said. “And so you have got a lot of hype on this industry.”
Agrium’s Wilson also reiterated that the Agrium price is fair, especially when compared to the CF price for Terra Industries Inc. “We’re almost 30 percent higher than what they offered Terra … So you can’t say we’re undervaluing you and then turn around and value someone else you’re trying to buy at a lower rate and say why don’t you come to the table.”
Observers last week were wondering if Agrium does indeed throw in the towel with respect to CF, would this mean a full throttle CF battle to take over Terra? On this front, CF said June 3 that it has received a Request for Additional Information (Second Request), from the U.S. Federal Trade Commission in connection with its proposed business combination with Terra. CF said the Second Request is a routine aspect of the regulatory process that extends the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR Act), during which the FTC is permitted to review the transaction for up to an additional 30 days after CF complies with the Second Request, unless earlier terminated.
“We are pleased that we have been able to narrow the focus of the FTC Staff’s review and look forward to resolving the remaining questions promptly and to moving ahead with this important transaction,” said Stephen Wilson, CF chairman, president and CEO.
CF said by providing information and working cooperatively with the FTC throughout the HSR Act review process over the past 90 days, CF has been able to help the FTC narrow the focus of its review significantly. CF said it looks forward to continuing to cooperate with the FTC and intends to respond expeditiously to the Second Request.
CF remains confident that the transaction will be approved in all relevant jurisdictions.
CF likely sees Terra as even more attractive due to the burgeoning pollution control market, which it told analysts at the Goldman Sachs conference last week could get as big as 3 million st of nitrogen products. “We think it is a large market, and it’s worth attacking,” said Anthony Nocchiero, CF senior vice president and CFO, who cited the primary focus as electrical generation plants and the diesel engine markets. Terra, with its Terra Environmental Technologies unit, is already well entrenched in that market.
Court changes position on Simplot mine work; company calls off layoff of 114 workers
The Ninth U.S. Circuit Court of Appeals late Thursday, June 4, lifted a stay on preparatory expansion work at the J.R. Simplot Co.’s Smoky Canyon Mine, which company officials said would have forced the layoff of 114 workers at Simplot’s Pocatello fertilizer plant and the phosphate mine.
The federal appellate court had reimposed the temporary stay in late May (GM June 1, p. 1) after the Greater Yellowstone Coalition filed for it. On Thursday, the court cited the economic harm continuing the stay would have on Eastern Idaho: “Here, the record, as supplemented on appeal, shows significant interim economic harm and job loss. The supplemental record also indicates that if the coalition’s request is granted, 104 employees – 78 at the Don Plant and 36 at the mine – will be laid off within the month, many within the week.”
Responding to the ruling, Simplot spokesman David Cuoio stated: “We are delighted the stay has been lifted. We’re also relieved that it will not be necessary to proceed with the layoffs that had been planned because of the court-imposed delay in our preparatory work to expand Smoky Canyon mine. We plan to continue with the expansion at Smoky Canyon immediately so we can get on with the business of providing crop nutrients that are helping to feed a hungry world. We remain committed to conducting responsible, environmentally sound mining practices and meeting the needs of our many grower customers.”
The 9th Circuit Court also noted that Simplot has cleared much of the land. It referred to a previous ruling by U.S. Magistrate Mikel Williams, who concluded that the Caribou-Targhee National Forest land is not pristine.
“Simplot does not, as Appellants claim, blame this court,” Simplot attorney Albert Barker stated in appealing the earlier stay. “Instead, the blame for these layoffs lies with Appellants and their interminable legal maneuvers designed to delay and ultimately prohibit mining in this area.”
Garrett Lofto, president of Simplot’s AgriBusiness Group, told Green Markets that 36 workers at the Smoky Canyon Mine would have been furloughed on Saturday, June 6, while 78 employees at Simplot’s Don Plant would have been idled on Saturday, July 11, including both salaried and hourly positions, based on seniority and need. In addition, nearly 200 outside contracting jobs would have been adversely affected. Plus, 22 Simplot jobs opened by attrition would not have been filled, Lofto said.
“This is not the result of a soft fertilizer market whatsoever. That is fact. We’re operating our Rock Springs (Wyoming) facility at capacity. Our intention is to operate Pocatello as well. The reason we are doing this is simply because of this stay,” Lofto said, noting Simplot has highly-skilled work forces at Pocatello and Smoky Canyon. “Losing quality employees is not something we want to do.”
Lofto said it is cost prohibitive to consider getting phosphate from other sources as the Greater Yellowstone Coalition has advocated, noting there is no compatible rail, slurry, or drying capacity at other sites.
Because only 11 months of ore remain at the Smoky Canyon Mine, Simplot had to protect its dwindling source and reduce production, Lofto added, noting the Pocatello plant has been operating since December 1944. The company has spent “many millions of dollars” to comply with federal and state environmental standards over the years.
“We believe, yes, it has been a pillar in the community. Our intention is to continue being there. That area is very important to us. We are not trying at all whatsoever to back away from that area. We are trying to get more involved and more committed for decades to come,” said Lofto.
In an affidavit filed June 2 in support of Simplot, Steve Landon, president of United Steelworkers Local 632 and a maintenance rebuild specialist at the Don Plant for nearly 40 years, noted the layoff set to occur by July 10 represented about 25 percent of the plant’s work force. About 60 of the 78 targeted employees are union members.
Landon told Green Markets that Simplot’s layoff announcement came as a shock to all employees who have taken on additional work responsibilities in recent months to help the plant weather the economic downturn. “It’s basically going to affect every department and classification across the board,” he said.
In an affidavit, Martin Hunt, Simplot vice president of mining and manufacturing, noted it has been a year since the U.S. Forest Service and Bureau of Land Management approved expanding the Smoky Canyon Mine. If those records of decision are not upheld by the courts and mining is prohibited, “more layoffs will be required, and the layoffs will become long-term or permanent,” Hunt stated.
An economic impact study conducted by Idaho Economics, a Boise research firm, concluded if the plant and mine were to close, that would have a combined economic impact of $131 million annually on 11 counties in Eastern Idaho and Lincoln County, Wyo. In addition to jeopardizing 560 jobs at both sites, another 1,066 jobs and $6.3 million in Idaho tax revenue could be lost.
Pocatello Mayor Roger Chase, who worked at Simplot’s sulfuric acid plants for 21 years, said it appears special interest groups are trying to shut down the mine in the courts after they failed to show it has violated environmental regulations. “It’s certainly a disappointment,” he said referring to the potential layoffs. “It’s on the verge of almost ridiculous to me,” Chase told Green Markets. “It worries me. $50,000 jobs are hard to come by.”
CF awards Peru design contract to Technip, expects it to be very attractive project
Technip, Paris, said June 4 that it has been awarded a lump sum contract for the front-end engineering design (FEED) of CF Industries Holdings Inc.’s proposed grassroots nitrogen complex in Peru. The contract covers a 2,600 mt/d ammonia unit, a 3,850 mt/d urea synthesis unit, a 3,850 mt/d urea granulation unit, and the utilities and offsite facilities.
The complex, which would be built near the city of San Juan de Marcona, is the first major nitrogen complex in the country. It would be fed by natural gas from the Camisea field, which would be connected to the facilities through a new pipeline system.
A final decision on the project will be made once the FEED is complete, which is expected to be at the end of 2009. Technip completed the feasibility study on the project in fourth quarter 2008.
CF Senior Vice President and CFO Anthony Nocchiero told analysts June 3 at the Goldman Sachs Basis Materials Conference that the company has been making substantial progress on the project and expects to sign a gas contract soon. He expects the design to come in at an attractive cost structure. “All the factors in the market have been moving in our favor, labor, engineering, the cost of steel and equipment is getting better. So, we think, if anything, the market’s moving in our direction with what we expect to be a very attractive project.”
PCS gets phosphate permit for Aurora
The U.S. Army Corps of Engineers, Wilmington District, said on June 3 that it rendered a Record of Decision and proffered a permit to the PCS Phosphate Corp. to expand its mining operations in Beaufort County, N.C. As conditions of the permit, PCS Phosphate must complete extensive compensatory mitigation and monitoring before, during, and following all mining and reclamation activities.
“This Record of Decision culminates a long, complex and thorough process,” said Col. Jefferson Ryscavage, Commander of the Wilmington District. “Our regulatory project manager and staff worked intensively with the applicant, federal and state resources agencies, and environmental organizations over a period of more than eight years. We are confident that we have identified an appropriately drawn and balanced alternative and proffered a permit that will allow continued access to an important mineral resource, while maximizing protection to wetlands, streams and watersheds, and ensuring reclamation, mitigation and stewardship of a sensitive and highly valued coastal ecosystem.”
The Corps said the original plan put forward by PCS has been significantly altered in the eight-year process of completing the Environmental Impact Statement. Eleven alternative plans, including a “no action” alternative, were evaluated. The Record of Decision (ROD) selects “Alternative L, with modifications” to be permitted, while requiring extensive mitigation and other actions as conditions for the permit. The Corps said this is both the most extensive regulatory permit ever proffered in North Carolina and the largest mitigation effort ever undertaken by an applicant.
Compared with PCS Phosphate’s original proposal, Alternative L reduces impacts to linear feet of stream by about 80 percent and reduces wetlands impacts by about 40 percent. The Corps and the applicant worked closely with resource agencies to protect the highest value ecosystem areas within the alternative selected. A brief table (see next page) shows PCS Phosphate’s original proposal, the final Alternative L as modified, and the reductions in mined area and impacts achieved.
In addition to the more than 1,750 acres of wetlands and 66,000 linear feet of stream avoided, Alternative L reflects substantive efforts to confine impacts to areas of lesser ecological value. Mining will be staged so that the impacts are scheduled to occur only as actual mining operations progress over approximately 36 years. Reclamation begins to restore some values to the impacted areas even as mining activities are ongoing. Reclaimed areas will reconnect to their watersheds and promote the return of appropriate vegetation and wildlife.
Restoration, enhancement, and preservation mitigations to be undertaken by PCS Phosphate as conditions of the permit will include more than 10,000 acres of wetland mitigation, and more than 84,000 linear feet of stream. The mitigation plan as a whole meets or exceeds federal guidelines.
The latest delay in the project was prompted by the U.S. Environmental Protection Agency’s Region Four in Atlanta, which said the project should be put on hold until further review by EPA’s Office of Water and the Assistant Secretary of the Army for Civil Works (GM March 30, p. 12). Thereafter, in April, PCS announced layoffs at the Aurora facility, impacting 24 workers, blaming the delay (GM April 20, p. 13).
PCS Phosphate Manager of Environmental Affairs Ross Smith was quoted in the local Washington Daily News as saying it was a good day for PCS and Beaufort County. He said that while the company will be leaving a lot of phosphate in the ground, it will accept the decision so that it could continue Aurora operations. He indicated that if there are no appeals that PCS could begin mining the new areas by the end of the summer.
EPA and local environmental groups could still appeal the latest decision. The Southern Environmental Law Center, one of the major opponents, had not responded to inquiries at press time. However, they told the local paper that their expectations are very low that PCS will do anything meaningful to address wetland destruction and damage to the Pamlico River.
| Original Proposal | Alternative L | Reduction | |
| Acres Mined | 13,961 | 11,343 | 2,618 |
| Wetland & open waters acres impacted | 5,668 | 3,927 | 1,773 |
| Linear ft. stream | 89,150 | 22,435 | 66,715 |
CF files application to mine 7,500 acres
Hardee County, Fla.-CF Industries Holdings Inc. has filed an application for a permit with the Florida Department of Environmental Protection to mine about 7,500 acres in Hardee County. The plan called for mining 6,385 acres of the tract, including about 1,700 acres of wetlands. The wetlands are in the watershed that feeds the Peace River, which provides drinking water to a portion of Southwest Florida. IMC Global Inc. and its successor, The Mosaic Co., have battled for years to secure permits for mines in the general area, and success has been costly for both sides. Those who receive the water downstream fear the quantity and quality will suffer from mining activities. The waterways to be affected include the Horse Creek tributaries Brushy and Lettis Creeks, and Peace River tributary Troublesome Creek, according to the Charlotte Sun newspaper. Although the company plans to restore the affected wetlands, environmentalists claim artificial wetlands do not adequately replace originals. The permitting process in Florida takes years. In addition to state approval, the project must also get the okay for dredging from the Corps of Engineers and secure a development agreement with Hardee County.
Canadian retailers appeal for security help
Winnipeg-Canada’s agriculture retailers, concerned about the high risk from terrorists and others seeking to acquire fertilizer and other chemicals, have issued an urgent appeal for help from the federal government in securing their facilities. “Canadian agri-retailers are prepared to do their part but should not be expected to shoulder the entire burden of shielding the sector from terrorist penetration,” declared David MacKay, executive director of the Canadian Assn. of Agri-Retailers (CAAR). “Public safety is a primary responsibility of the federal government and we need their help to secure the products that are critical to Canada’s agricultural economy.” MacKay emphasized that their U.S. retail counterparts already benefit from access to enhanced tax credits and grants for security upgrades at agri-business facilities, including perimeter fencing, computer access controls, video surveillance, and security lighting. “Agriculture is a global market and Canadian producers now find themselves at a competitive disadvantage because they must pick up the tab for security costs that have nothing to do with crop production.” Supporting this effort, farmers with Grain Growers of Canada cautioned that leaving it to the agri-retail sector to pick up the costs of security upgrades will result in higher prices for crop inputs. “Inevitably these costs must be paid for at the farm gate – something that will not sit well with grain, pulse and oilseed farmers,” warned Richard Phillips, GGC executive director. “Our government needs to help protect Canada’s investment in agriculture by ensuring we remain globally competitive.” According to CAAR, the idea of partnering with the government on a comprehensive security protocol has won tremendous support among individual Members of Parliament, where formal recommendations have been made by a house and senate standing committee, but no support has been forthcoming from the Prime Minister or his cabinet.
Meth thieves tripped up by faulty gauge
Paw Paw, Mich.-Thieves believed to be shopping for methamphetamine ingredients probably thought they had a real haul when they hooked up and pulled away a two-ton anhydrous ammonia tank from a farm field in Van Buren County late last month. The tank was found abandoned a couple of days later about two or three miles from the site where it had been stolen. “The tank actually was almost empty when it was taken away,” Van Buren County Sheriff’s Deputy Ron Douglas told Green Markets, “but the suspects thought that it was full because the gauge was defective and read 100 percent full.” He said the tank was found covered with a tarp and the tires on the trailer were flattened, indicating the thieves had planned to return and try to empty what ammonia remained. Douglas said that no one has been arrested, and that the case continues to be under investigation. He and other deputies responded early on Memorial Day to the theft report in Bloomingdale Township. A farmer had called in a report that he had been using the tank of anhydrous ammonia to fertilize his corn field, left it there Sunday night, and discovered Monday morning that the tank was missing. Desk Sgt. Wayne Polomcak said meth thefts like this occur in the Van Buren area but are not as common as they have been in other agriculture areas, possibly because of an aggressive anti-meth program at the state level.
JBS ammonia leak sends 51 to hospital
Worthington, Minn.-As many as 51 employees were transported to a local hospital June 2 after an overhead anhydrous ammonia pipe broke, releasing fumes in a work section of the JBS Swift meat packing plant here. Sanford Regional Hospital reported treating those brought in for respiratory complaints, nausea, dizziness, and weakness from ammonia exposure, and admitting five of the 51 for further evaluation. They were all discharged by late the next day. Worthington Public Safety Director Michael Cumiskey, who set up a command post at police headquarters, issued a statement that the leak was contained when emergency staff arrived on scene. Areas affected by the leak were evacuated but have since resumed operation, and the plant reportedly is back in full operation. Minnesota OSHA immediately announced that it was opening its investigation by first interviewing employees at the scene of the release. Spokesman James Honerman said OSHA conducted a similar investigation of an ammonia release in January 2008 that sent 34 to the hospital when a drain valve ruptured from over-pressuring. The company was fined $3,500 for two safety violations. Honerman said it’s unclear if the June 2 release had anything to do with a faulty valve.