CALGARY — Canadian fertilizer giant Agrium Inc. is dropping its US$5.5-billion takeover bid for U.S. company CF Industries Holdings Inc., which this week came one step closer to winning a hostile acquisition of its own.
The Calgary-based company said Thursday it will let its offer for CF expire on March 22 after being rebuffed for more than a year.
“It is unfortunate we could not conclude this transaction, given the strong support shown by both CF and Agrium shareholders,” Agrium president and chief executive Michael Wilson said in a statement.
“Agrium applies a disciplined approach to employing capital and will continue to focus on the significant growth opportunities available to us globally across the agricultural value chain.”
Agrium had repeatedly vowed it would not overpay for CF, a nitrogen-producer based in Deerfield, Ill.
The company (TSX:AGU) had offered US$45 in cash plus one of its shares for each CF share in a bid that valued the company at nearly US$5.5 billion.
However the offer was contingent on CF dropping its own takeover bid for Iowa-based fertilizer producer Terra Industries Inc., which is worth about US$4.7 billion.
CF won a key victory Wednesday when Terra ruled that CF’s latest overture for the company was superior to a friendly deal with Norway’s Yara International valued at US$4.1-billion.
Yara has indicated it would not be keen on getting into a bidding war for Terra. It has until March 17 to meet or beat CF’s offer.
On Wednesday, Broadpoint AmTech analyst Edlain Rodriguez said the only thing Agrium could do to get CF to agree to a deal would be to put forward a “knock-out bid” so compelling the target company’s board would have no choice but to accept it.
“They would have to have a bid that’s significantly higher than the current one that they have,” he said.
CF also has so-called “poison pill” provision in place, which makes it difficult and costly for any unwelcome acquirer to complete a transaction without the CF board’s approval.
So even though roughly 62 per cent of CF shareholders tendered to the Agrium offer, the Calgary company would have been unable to take up any of those shares.
Agrium had pressed CF to drop its poison pill and let its shareholders have their say and even planned to try to have its own nominees installed on CF’s board of directors at the target company’s annual general meeting this spring.
Shares in Agrium, which made its announcement after markets closed, dropped 2.5 per cent to C$68.33 on the Toronto Stock Exchange Thursday.
In New York, CF shares dropped 2.8 per cent to US$100.61, while Terra’s stock dropped slightly to US$46.90.