Agrium steps up pressure as US$4.8-billion offer for CF set to expir

CALGARY — Fertilizer giant Agrium Inc.’s (TSX:AGU) hostile takeover offer for CF Industries Holdings Inc. (NYSE:CF) is set to expire Wednesday and neither side embroiled in the nine-month drama appears ready to budge.

CALGARY — Fertilizer giant Agrium Inc.’s (TSX:AGU) hostile takeover offer for CF Industries Holdings Inc. (NYSE:CF) is set to expire Wednesday and neither side embroiled in the nine-month drama appears ready to budge.

Agrium is offering US$45 in cash plus one of its own shares for each CF shares, bringing the total value of the transaction to nearly $4.9 billion based on Tuesday trading on the New York Stock Exchange.

Earlier this month Agrium sweetened the bid by $5 per share, declaring it its “best and final” for the Deerfield, Illinois-based nitrogen and phosphate producer.

But like each overture Agrium has made since February, the offer was staunchly rebuffed by CF, which is involved in a separate hostile takeover battle of its own for its U.S. rival Terra Industries Inc. (NYSE:TRA).

In an effort to further nudge CF shareholders into accepting the offer Monday night, Agrium highlighted a report by a proxy advisory firm that recommended CF shareholders tender to the Agrium bid.

The RiskMetrics Group report said the offer is “compelling enough to at least earn a seat at the negotiation table.”

Agrium’s chief executive has repeatedly reached out to his CF counterpart to take a meeting, but has been repeatedly turned down.

“With support for an Agrium/CF combination from a resounding majority of CF stockholders, we expect the CF board will do the right thing and move forward with Agrium’s offer,” Wilson said.

“If CF refuses to act, Agrium will consider all options including nominating a slate of directors to the CF board and pursuing litigation.”

Complicating Agrium’s pursuit is CF’s so-called “poison pill” provision that prevents a would-be acquirer from taking up any of the shares tendered. Unlike in Canada, the plan 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 on-side, even if a majority of shareholders are in favour of the transaction.

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.

“Given the extraordinary nature of the CF board’s ’end run’ around its own shareholders, we remain concerned about the accountability of the CF board going forward,” the RiskMetrics report said.

On Tuesday, Agrium sought to demonstrate it has a “clear path to completing the CF acquisition” by announcing it reached a proposed consent agreement with the U.S. Federal Trade Commission.

The proposed agreement signed with FTC staff now goes to the commission for review and approval, something which is generally concluded within a few weeks.

The statement did not disclose specifics, but said the remedies were “not material” to the transaction.

Agrium has already worked out concerns Canadian regulators had with the proposed takeover.

The Competition Bureau said Agrium would have to divest half of its nitrogen-based fertilizer production facility in Carseland, Alta., and supply additional product to Terra, which has recently ventured into Western Canada.

Terra would buy 50 per cent of Agrium’s ammonia and urea production complex in Carseland, and would have a five-year supply contract with Agrium covering 466,000 tonnes of nitrogen-based fertilizers per year.

Meanwhile CF’s hostile US$4.1-billion bid for Sioux City, Iowa-based Terra also continues to meet resistance. CF is trying to have its own slate of directors voted onto Terra’s board at the target company’s annual meeting on Friday.

“If the CF Industries nominees are not elected, there will be nothing to compel the Terra board to engage in good faith negotiations with us. Your vote is the only way to make this happen,” CF wrote in a letter to Terra stockholders Tuesday.

Agrium’s offer for CF is conditional on CF dropping its bid for Terra.

Agrium shares rose 3.7 per cent to C$58.49 in afternoon trading Tuesday on the Toronto Stock Exchange.

CF shares were up more than four per cent to US$84.72 on the New York Stock Exchange in afternoon trading.

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