Bid for CF not about interference: Agrium

Having taken its case directly to shareholders in U.S. fertilizer firm CF Industries, fertilizer and ag retail giant Agrium now aims to reassure company brass that its takeover bid for CF is serious.

Agrium CEO Mike Wilson on Thursday released a letter he wrote to CF CEO Stephen Wilson, saying that despite CF “repeatedly” alleging the Agrium bid is just an attempt to interfere in CF’s play for another fertilizer firm, “let me assure both you and the CF stockholders that nothing could be further from the truth.”

Calgary-based Agrium’s most recent unsolicited offer for CF is US$35 plus an Agrium common share in exchange for each CF share. The board of Chicago-based CF last month rejected that offer.

“Our offer represented a premium of over 30 per cent on the date it was announced and we have since raised the cash component of our offer by 10 per cent,” Agrium’s Wilson wrote to CF’s Wilson. “Furthermore, we have repeatedly indicated our willingness to pay more if CF would only meet with us and demonstrate additional value.”

CF, whose holdings include a major nitrogen (N) fertilizer plant at Medicine Hat, Alta., is attempting its own hostile bid for Terra Industries, an Iowa-based fertilizer firm.

Terra, whose facilities include a major N plant at Courtright, Ont., has also rejected CF’s latest bid, an all-stock offer worth about US$30.50 per Terra share.

“Higher premium”

“Based on unaffected stock prices, Agrium is offering a multiple for CF that is 37 per cent greater than that proposed by CF for Terra,” Agrium’s Wilson wrote in his letter to the CF CEO.

“How can you on the one hand, question why Terra won’t engage in merger discussions with CF, while on the other hand, you refuse even to discuss our higher premium offer?”

Wilson added that the “full Agrium team” and its advisors are ready to meet “immediately” anywhere with CF brass and their advisors “to negotiate a mutually beneficial transaction between our two companies.”

Agrium recently urged CF shareholders to withhold their votes for three nominated board members at CF’s annual shareholders’ meeting, so as to send a message to the Chicago firm’s board of directors.

But CF has reportedly received support for its position from RiskMetrics, a well-known proxy voting advisory and corporate governance services firm.

New York-based RiskMetrics is quoted in news reports as recommending CF shareholders re-elect the board members and questioning Agrium’s motives for the CF takeover bid.

But as Agrium has previously noted, RiskMetrics also accuses CF of restructuring its bid for Terra to avoid a shareholder vote on the matter.

“We believe that CF has advanced a somewhat absurd rationale for its decision to restructure the Terra offer. In effect, CF has disenfranchised its own shareholders to quell the concerns of another company’s board, and arguably to thwart an unwelcome bid,” Agrium quoted from a RiskMetrics report March 25.

“Already over-concentrated”

Meanwhile, Canada’s Competition Bureau is gathering opinion on the proposed takeovers. The National Farmers Union said Tuesday that the bureau has asked it to take part in consultations on the bidding companies’ proposals.

“Mergers proposed between CF Industries and Terra Industries and between Agrium and CF Industries have the potential to dramatically reduce competition in an already over-concentrated sector,” NFU president Stewart Wells wrote Tuesday in a reply to the bureau.

“These mergers are not attempts to gain needed efficiencies, but instead attempts to gain power. Fertilizer corporations have been spectacularly profitable in recent years. 2007 profits for the largest five North American companies (Agrium, CF, Terra, PotashCorp and Mosaic) totalled more than $3 billion. 2008 profits neared $10 billion.

“The proposed mergers cannot be justified by the need ‘to remain competitive,'” Wells wrote. “Rather, they are transparent attempts to reduce competition.”

Wells also said the NFU would be glad to work with the bureau on evaluating the costs and benefits of the mergers, but not before it gets an answer to its earlier request for the bureau.

The NFU in February asked the bureau for specific details on the methods, assumptions and sources it used in allowing the sale of Tyson Foods’ Lakeside Packers beef plant at Brooks, Alta. to XL Foods.

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