CF Industries rejects Agrium's offer as 'inadequate'

CF Industries Holdings Inc. rejected Agrium Inc.'s $3.04 billion hostile bid as "grossly inadequate" and said it will proceed with its own offer to buy rival fertilizer maker Terra Industries Inc.

Agrium's takeover bid is "a transparent attempt to interfere with CF Industries' proposed business combination with Terra," CF Chief Executive Officer Stephen R. Wilson said today in a statement. CF is prepared to increase the value of its bid for Terra so that it would be equivalent to $27.50 a share, or $2.74 billion, Wilson said in an accompanying letter to Terra's board of directors.

Agrium and CF are competing to become the dominant North American producer of ammonia and other nitrogen-based crop nutrients that farmers use to increase yields. Fertilizer-makers' share prices, which had risen more than fourfold since 2003, plunged 58 percent last year, making takeovers a more affordable way to expand than by building new facilities.

"The rationale for the beginning of mergers in fertilizer is access to cheap production capacity," Malcolm E. Polley, who oversees about $1 billion including CF shares at Indiana, Pennsylvania-based Stewart Capital Advisors LLC, said Feb. 27 in a telephone interview. "Even under the most ridiculous assumptions for earnings for the next couple of years, you're still getting awfully cheap assets."

Agrium, the largest U.S. retailer of seeds, pesticides and fertilizers, offered one of its shares plus $31.70 in cash for each CF share on Feb. 25. The offer would require CF to abandon its bid for Terra.

Agrium's Bid

Agrium's takeover of CF would create a company with annual sales of about $14 billion, generating $150 million of savings within three years, Agrium Chief Executive Officer Michael M. Wilson has said. The combination would be the world's second- largest nitrogen producer by capacity after Oslo-based Yara International ASA, according to Agrium.

On Jan. 15, Deerfield-based CF made an unsolicited all-stock offer of 0.4235 of a CF share for each Terra share in a bid to create the world's largest publicly traded nitrogen producer. Today CF raised its offer to a range of 0.4129 to 0.4539 per CF share, depending on its share price, to ensure Terra holders receive $27.50 a share.

Based on CF's closing price of $60.59 on March 6 on the New York Stock Exchange, CF's sweetened offer is 7.2 percent higher than its original bid.

Sioux City, Iowa-based Terra rose $1.11, or 4.4 percent, to $26.11 on March 6 in New York composite trading. Calgary-based Agrium dropped C$1.75, or 4.2 percent, to C$40.28 on the Toronto Stock Exchange.