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— Arbitrage —
CF Industries Holdings Inc. |CF Deal value $3.4 billion Spread 03/31/09 $0.19, or 0.2% The proxy season's most interesting arbitrage situation has definitely become the three-way battle in the nitrogen fertilizer industry, which also could generate further consolidation. Agrium Inc. raised its hostile approach for CF Industries Holdings Inc. March 27 to $35 per share in cash and an Agrium share for each share of CF Industries. The offer is capped at 6% cash and 54% stock and designed to offer an option of 1.8685 of Agrium shares or $75.30 in cash.
On a prorated basis, the bid is now worth about $70.55 per share. CF Industries has said it should command $100 per share, a pitch Agrium says no unbiased observer would declare a credible price and that Agrium would not pay that much. But Agrium clearly is prepared to raise its bid again if due diligence warrants it, and it needs to do so to complete a negotiated transaction. And the presentation of a price by CF Industries indicates that it is a willing seller at some point. Agrium missed the deadline for nominating a dissident slate to the CF board, but with its latest bid has also launched a proxy solicitation asking CF Industries' shareholders to withhold votes for the company's nominees who are up for re-election at the April 21 annual meeting as a means of support for its offer. The M&A scuffle began when CF Industries launched an unsolicited bid for Terra Industries Inc. on Jan. 15 that it has since amended twice, first to provide a collar for the all-stock exchange offer and on March 23 to increase the nominal dollar value of the bid to $30.50 per share in CF Industries stock. Terra shares trade at roughly a $2.90, or 10%, spread to the CF Industries' bid, which indicates the market has less faith in that deal coming to fruition. However, since CF Industries shares are propped up by the Agrium offer, the true value of CF Industries bid for Terra is obscured. Terra has rejected that offer and said that it is dedicated to pursuing its standalone strategy. The prospect of an offer from yet another player in the nitrogen fertilizer industry remains, but the obvious white knight for Terra, Yara International ASA, Terra's joint venture partner in the U.K., has indicated it is unlikely to enter the fray. CF Industries is engaged in a proxy contest to replace Terra board members at its annual meeting, which should occur around mid-May. The defining date for the three-way hostile could be the April 21 CF Industries shareholder meeting. Agrium claims that CF Industries shareholders have expressed support for its bid over the prospects of CF Industries acquiring Terra. "If CF does not accept the bid, I assume their shareholders will put so much pressure on them that they will engage with us," Agrium CEO Mike Wilson said on a conference call announcing Agrium's increased offer. Wilson also challenged CF Industries to support its claim that the company is worth more and suggested that within Agrium there was a dialogue about whether the best strategy was to raise or lower the offer. Both potential deals face the prospect of extended antitrust reviews of their respective nitrogen fertilizer operations. CF Industries refiled for antitrust in the U.S. on March 23. Agrium said it has filed in Canada and the initial waiting period for its U.S. filing is April 23. |
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