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CALGARY - Fertilizer giant Agrium Inc.’s (TSX:AGU) ambitions to take over Illinois-based CF Industries Holdings Inc. (NYSE:CF) hit an obstacle Friday, as the target company made significant headway in a hostile bid of its own.
All three of CF’s nominees were elected onto Terra Industries Inc.’s (NYSE:TRA) eight-member board of directors, increasing the odds that its US$4.1-billion bid will come to fruition.
Calgary-based Agrium’s nearly $5-billion offer for CF, which has been repeatedly rebuffed since February, was conditional upon CF dropping its pursuit of Terra.
"I think that Agrium should simply take its marbles and go home. Agrium was a great company without CF and it’s going to be a great company without CF in the future," said Mark Connelly, an analyst with Sterne Agee in New York.
"The prospects of hanging on to see what happens next - there are probably better things for them to do."
Following the vote at Terra’s annual meeting Friday, CF chief executive Stephen Wilson said Terra stockholders voiced their support for the acquisition by voting in the CF slate.
"It’s time to move forward and put these two great companies together," he stated.
Agrium has handled itself well throughout the nine-month-long battle, refusing to overpay for CF and listening to its own shareholders, Connelly said.
"Their reputation has been enhanced," he said. "Agrium really conducted themselves in a way that they couldn’t lose and I think that there are a lot more investors out there who have gained a lot of respect for Agrium in this process."
Sioux City, Iowa-based Terra said it was "disappointed" by the outcome of the shareholder vote at its annual meeting.
"During the weeks leading up the annual meeting, Terra shareholders delivered a consistent message to Terra’s board and management team that CF’s latest proposal substantially undervalues Terra’s robust near-and long-term prospects and that they do not support CF’s proposal on its current terms," the company stated Friday.
"Nevertheless, Terra shareholders noted that current trends in the fertilizer market could provide potential consolidation opportunities for many market participants. Terra’s board, as always will continue to maintain an open-minded approach to considering any bona fide opportunity to create meaningful value for Terra shareholders."
Connelly said the Agrium-CF combination is better for shareholders than the CF-Terra one, but neither transaction is really necessary in the grand scheme of things.
"Personally I like all these companies. I think that there is a place for all three of them in the investment market," he said.
"And I think that it’s really unfortunate that we may lose one of them."
Agrium said Thursday that about 62 per cent of CF’s outstanding shares had been tendered to the offer of US$45 in cash plus one Agrium share for each CF share.
The offer was to expire Wednesday, but has been extended until midnight Dec. 18.
Back in June, an identical percentage of CF shareholders backed Agrium’s bid.
Agrium shares rose 37 cents to C$61.13 on the Toronto Stock Exchange Friday.
CF shares dropped 14 cents to US$82.73 on the New York Stock Exchange. With Agrium’s bid price worth $102.32 per share Friday, it’s evident investors don’t expect the deal with CF to go through.
Meanwhile, Terra shares rose more than five per cent to $40.06.
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