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Latest Headlines
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Feb 25, 2009 2:36:00 PM MST
Agrium makes hostile US$3.6 billion bid for U.S. fertilizer company CF Industries (Agrium)
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CALGARY _ Agrium (TSX:AGU) says it could become the world´s fourth-largest publicly traded fertilizer company if it is successful in its US$3.6-billion hostile bid to buy U.S. firm CF Industries Holdings.
Calgary-based Agrium said Wednesday its offer is worth around US$72 per CF share _ with 56 per cent in Agrium common stock and the rest in cash. That represents a 30 per cent premium over CF´s closing price Tuesday.
Agrium shares fell 8.5 per cent to C$46.03 in Toronto and ped 9.3 per cent to US$36.57 in New York Wednesday. CF shares rose $6.19 or more than 11 per cent to $61.77 on the New York Stock Exchange.
"We believe this acquisition benefits both Agrium and CF by creating a stronger global player that can more effectively compete on the world stage," said Agrium CEO Mike Wilson on a conference call.
Agrium is attaching some conditions, including that CF its own hostile $2.1-billion takeover bid for Terra Industries Holdings Inc. (NYSE:TRA).
Shortly after Agrium announced its offer, CF said its board of directors "will evaluate the proposal carefully in the context of CF Industries´ strategic plans to shareholder value, including its offer to acquire Terra Industries Inc."
There has been a trend of heightened merger and acquisition activity in the fertilizer sector, and Agrium chief financial officer Bruce Waterman said he expects there to be more over time.
"It´s quite a fragmented industry and what you really need from an efficiency point of view is a lot of big companies that have the financial capability to really serve the customers," he said in an interview.
Agrium has been aggressively growing its U.S. retail business in recent years, first with its $590.5-million acquisition of Royster Clark in 2006, then with its $2.65-billion takeover of UAP Holding Corp. last year. It is now the largest agriculture retailer in North America.
And Agrium is not done yet, said Waterman.
"You will see us continue to grow really all the way across the value chain," he said.
"And we´ll be disciplined about it. We´re certainly not going to risk the company. We´re going to be financially prudent, but we´ll have the resources, I think, to do that."
The Agrium-CF combination would a company with a "substantially larger global footprint" with combined crop nutrient production of about 17 million tonnes, Agrium said in a statement. Combined revenues would be nearly $14 billion a year.
The combination would also lead to $150 million in annual synergies _ generally a combination of reduced costs and increased revenue _ to be phased in over three years, the company said.
Agrium held talks with CF, a Deerfield, Ill. company with 1,400 employees, before that company went public in 2005 and said it has been watching the company ever since.
"The business logic was clearly apparent then, and it is even more today," Wilson said on the conference call.
He said the acquisition would triple Agrium´s phosphate production and mesh well with its existing U.S. distribution network.
"We believe it will be clear to everyone that our proposal provides significantly more value for CF Industries stock holders than its pending proposal to acquire Terra industries, or any other options," Wilson said.
CF´s bid for Terra "accelerated our timing in terms of actually making a move," said Waterman, Agrium´s CFO.
Terra, an Iowa-based fertilizer company with about 870 employees, is "a very attractive company" in its own right, but Agrium has its sights clearly set on CF, Waterman said.
"It´s not that we don´t think Terra´s a good company, it´s just we don´t need it."
Credit-rating agency Moody´s Investors Service said Wednesday it is reviewing Agrium for a possible downgrade.
"The timing of the transaction will be uted in an environment where industry fundamentals after having been very favourable are under some pressure," Moody´s stated.
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