CF shareholders tender 62 pct of shares into Agrium’s $5.1B buyout offer; Terra votes Friday

Majority of CF shareholders support Agrium bid

NEW YORK — Developments this week could determine whether the fertilizer wars may finally be coming to an end.

Canada’s Agrium Inc. said Thursday that shareholders controlling 62 percent of CF Industries stock have backed its $5.1 billion buyout offer, which CF Industries’ management is vehemently against. But in a move that could jeopardize Agrium’s deal, shareholders of fellow fertilizer maker Terra Industries Inc. will vote Friday to decide a proxy battle that will determine whether that company will accept CF Industries’ own hostile takeover proposal.

CF is urging Terra shareholders to elect its three board nominees and reject an incumbent slate opposed to CF’s pursuit. Proxy advisory firm RiskMetrics Group has recommended electing CF’s nominees, while three other firms have recommended against. Terra has repeatedly rejected CF’s bids, including its latest $4.1 billion offer, as inadequate.

The nearly year-long industry saga began when CF made its first $3.6 billion bid for Terra in January. The next month, Agrium offered to buy CF, in an effort to block its rival’s grab for Terra. Agrium’s offer is conditioned on CF stopping its pursuit of Terra.

Despite sweetening the deal multiple times, Agrium has faced repeated rejections. Agrium’s most recent offer of $45 in cash and one Agrium common share per CF share is valued at $101.90 per CF share, or $5.1 billion, based on Wednesday closing prices.

The latest amount of tendered shares came after months of multiple deadline extensions. And Agrium said it plans to extend the offer deadline yet again, this time to Dec. 18.

Agrium CEO Mike Wilson says the fact that a majority of CF shareholders back the offer sends “a clear and unambiguous message to CF’s board that they want this deal with Agrium.” Deerfield, Ill.-based CF, however, maintains that the tender result does not reflect stockholder support for Agrium’s offer price.

“CF Industries has heard from its stockholders that there is very little support for the terms of Agrium’s offer,” the company said in a statement. “The tender result does not change the fact that Agrium’s offer is far from compelling.”

Sterne Agee analyst Mark Connelly agreed that CF shareowners again failed to deliver a unified message, given that in an earlier tender offer almost exactly the same number of shares were committed — meaning 1 of every 3 shares don’t back the deal.

He said today’s result is one that CF’s board “can pretty easily ignore given its view that the CF-Terra combination would be highly accretive,” Connelly wrote in a note to investors. A shareholder rights plan, or so-called “poison pill” measure, that is in place at CF to block unwanted takeovers would make it difficult for Agrium to succeed in its takeover without Agrium’s management being persuaded on the deal, as well.

In terms of Terra shareholders’ vote on Friday, Connelly thinks that if CF loses, it will make at least one more, potentially significantly higher bid.

The fertilizer industry’s hunger for consolidation intensified at the start of the year when company share prices had been beaten down to significantly low levels. As the economy declined, struggling farmers scaled back demand for fertilizer, driving down prices and stock values for fertilizer companies.

Share prices have since recovered with an improving outlook for the industry, but still remain far below last year’s levels.

“We see little economic value in nitrogen consolidation, but view Agrium-CF as a more strategically logical combination than CF-Terra,” Connelly said.

CF’s shares lost $3.42, or 4 percent, to close at $82.87, while Agrium shares rose 29 cents to $57.19. Shares of Sioux City, Iowa-based Terra edged up 5 cents to close at $38.10 after hitting a 52-week high of $38.89 earlier in the session.