CF gains on speculation Agrium takeover more likely
CF Industries Holdings Inc. gained in New York amid speculation that Agrium Inc's hostile attempt to acquire it will benefit from the demise of CF'ss yearlong bid for a third competitor.
CF rose $2.23, or 2.4 percent, to $95.42 at 4:15 p.m. in New York Stock Exchange composite trading. Agrium fell C$2.69, or 4 percent, to C$64.06 in Toronto.
CF had spurned Agrium offers containing progressively larger cash components since February, saying its $3.88 billion bid for Terra Industries Inc. would be better for shareholders. CF dropped that offer yesterday.
"The Terra distraction is now out of the way," Louis Meyer, a New York-based analyst at Oscar Gruss & Son Inc., said in a telephone interview. "Agrium is now in a better position to make a real stab at acquiring CF."
Agrium plans to nominate two directors to its target company's board at an annual shareholders meeting and seek stockholder approval to eliminate a so-called poison pill clause.
"We remain fully committed to acquiring CF," Calgary-based Agrium said in a statement.
Agrium's current offer of $45 plus one of its own dollar- denominated shares for each of CF's shares was valued at $5.36 billion at the close of regular trading yesterday.
The market "will likely show in our share price that this increases the likelihood that Agrium will be successful in acquiring CF," said Richard Downey, a spokesman for Agrium.
CF Sells Stake
CF has sold all of its shares in Terra for a gain that "more than offsets" expenses related to the proposed acquisition, the Deerfield, Illinois-based company said yesterday in a separate statement.
Terra rose 91 cents, or 2.8 percent, to $33.57 in New York. The shares had more than doubled since the day before CF's first offer on Jan. 15, 2009.
"If Agrium brings a resolution to nullify the poison pill, that's an interesting angle, and I think their odds have improved," Chris Damas, a BCMI research analyst in Barrie, Ontario, said in a telephone interview.
The poison pill provision prevents a hostile acquirer from accumulating more than 15 percent of the Delaware-incorporated company without the board's approval.
'Market's Expectations'
CF said its decision regarding Terra doesn't make a deal with Agrium more enticing. "The market's expectations for value have increased significantly since the time we last rejected Agrium's offer," CF spokesman Terry Huch said in an interview.
As for CF's bid for Sioux City, Iowa-based Terra, "we made a very compelling offer with full value and that offer was rejected unanimously," Huch said.
CF Chief Executive Officer Stephen R. Wilson withdrew the bid because "an acquisition of Terra now would require a significant increase in our offer, given the substantial uplift in equity values in the fertilizer sector," according to CF's statement. Increasing the bid that much wasn't in stockholders' best interests, Wilson said. The decision ended a three-way battle over whether Agrium or CF would be the world's second- largest maker of nitrogen-based fertilizers.
Rising fertilizer supply may make it more difficult for producers to hold out for higher bids, Damas said. New production in Trinidad and the U.S. will add more than 1.7 million tons a year of urea ammonium nitrate, a type of fertilizer, to the U.S. market starting this year, he said.
Shares Gains
To be sure, the share gains that put Terra out of CF's reach may also make Agrium more reluctant to raise its CF bid again, Mark Connelly, a New York-based analyst at Sterne, Agee & Leach Inc., said in a telephone interview. CF shares climbed 85 percent in 2009.
"Agrium took a very disciplined approach to its bidding because their strategy is very disciplined about acquisitions," Connelly said. "As long as they stick with that strategy, the probability of them acquiring CF is darn low."