Agrium extends CF offer

CALGARY — The chief executive of Agrium Inc. (TSX:AGU) is hopeful his counterpart at reluctant takeover target CF Industries Holdings Inc. (NYSE:CF) will soften his stance after a majority of CF shareholders once again voiced their support for Agrium’s nearly US$5-billion bid.

CALGARY — The chief executive of Agrium Inc. (TSX:AGU) is hopeful his counterpart at reluctant takeover target CF Industries Holdings Inc. (NYSE:CF) will soften his stance after a majority of CF shareholders once again voiced their support for Agrium’s nearly US$5-billion bid.

“Their CEO is a good guy. Their board, I’m assuming is a mature, experienced board that knows they have fiduciary duties to their shareholders,” Mike Wilson said in an interview Thursday.

“Once they reflect on it — and we’re reaching out to them — we do hope they come to the table and we have a rational, productive discussion on the merits of our offer.”

Calgary-based fertilizer giant Agrium has been pursuing CF since February. To date, all Agrium’s advances have been rebuffed and CF’s management has declined invitations to negotiate with its would-be acquirer.

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.

However, last time there was some confusion over whether shareholders were voting in favour of the deal, or just in favour of engaging with Agrium.

“From our point of view, 62 per cent voted in favour of CF selling the company to us, at the price that we said we were prepared to pay,” Wilson said.

“It’s a lot more significant than people think.”

Agrium’s quest is complicated by CF’s so-called “poison pill” provision, which is meant to protect shareholders in the event of a hostile takeover by preventing hostile suitors from taking up any of the shares tendered.

Unlike in Canada, a poison pill can remain in effect indefinitely in most U.S. jurisdictions.

Essentially that means the acquisition can’t go through unless the CF board of directors is onside, even if a majority of shareholders are in favour of the offer. As such, Agrium’s strategy so far has been to urge CF shareholders to exert pressure on their board in the hopes it eventually relents.

However, it is open to taking more aggressive action, like trying to get its own slate of directors nominated to CF’s board, or filing a lawsuit.

“I hate going to court. I always feel that the best result is one that you do through rational business discussion,” Wilson said.

“But at the end of the day, we do have the option of suing to get the pill lifted and we do have the option of putting a slate on. And we’ll consider that if they don’t engage with us.”

In a statement Thursday, CF held its ground.

“CF Industries does not believe that the tender results reflect stockholder support for the terms of Agrium’s offer. In fact, CF Industries has heard from its stockholders that there is very little support for the terms of Agrium’s offer,” it said.

“The tender result does not change the fact that Agrium’s offer is far from compelling.”

However, the Agrium chief is hopeful CF’s management will come around once it has a chance to digest the results of the tender offer.

“(CF Industries CEO Steve Wilson) can’t hide behind shareholders saying they don’t want to do this deal,” Agrium’s chief executive said. “There’s no way to spin it that the shareholders aren’t wanting him to sit down with me and do a deal. It’s just the reality of it.”

Earlier this month, Agrium had sweetened the cash portion of its takeover bid by $5 per share, declaring it its “best and final” offer for the Deerfield, Ill.,-based nitrogen and phosphate producer.

Based on Agrium’s closing share price of $55.93 on the New York Stock Exchange Thursday, the transaction is worth approximately US$4.9 billion.

The offer, just like every other one since its first overture in February, was dismissed by CF, which is involved in its own hostile takeover battle for its U.S. rival, Terra Industries Inc. (NYSE:TRA).

CF’s $4.1-billion bid for Terra has met resistance since it began its chase in January.

CF is seeking to have its own slate of nominees elected to Terra’s board of directors at the target company’s annual general meeting Friday.

If CF is successful, then Agrium’s chances of winning are “greatly diminished,” said credit-rating agency DBRS in a report.

“With CF in the midst of its own attempt to acquire Terra Industries Inc. and Agrium’s offer conditioned upon CF not acquiring Terra, DBRS expects that additional complexities related to the transactions may well arise or that the transactions may not be successfully completed at all,” it said.

DBRS put Agrium’s rating “under review with developing implications.”

CF shares dropped more than 4.5 per cent to US$82.36 on the New York Stock Exchange.

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