Agrium, CF Industries Battle Takes New Turn

Canadian fertilizer giant Agrium Inc. is going directly to shareholders of CF Industries Holdings Inc. to push its hostile $4.2 billion takeover bid for the U.S. company.

Agrium said Monday, April 6, that it is urging fellow shareholders of CF Industries to withhold support from three board members who are up for re-election later this month.

Agrium said it filed a proxy statement with the U.S. Securities and Exchange Commission and mailed shareholders a letter asking them to withhold their votes to protest CF’s rejection of its latest acquisition offer last month.

Agrium has been unsuccessfully trying to buy CF Industries for months. Late last month, Agrium sweetened its takeover offer to $35 and one share of Agrium for each share of CF Industries, a nitrogen producer that has repeatedly shunned Agrium’s offers. That values CF at about $4.2 billion.

The April 6 letter comes days after CF Industries rejected a sweetened bid from Agrium, calling the bid "grossly inadequate" despite the fact that the cash portion had been increased by 10 percent. In the letter to CF’s shareholders, Agrium said a rejection of the directors up for re-election would signal willingness to negotiate with the company, which first looked at buying CF Industries in 2005.

"CF’s board has left us with no choice but to take our offer directly to you. We urge you to withhold your votes for the three CF directors who are up for re-election at the CF annual meeting on April 21," Agrium said in its letter to CF shareholders.

Agrium has been aggressively growing its U.S. retail business in recent years, first with its $590.5-million acquisition of Royster Clark in 2006, then with its $2.65-billion takeover of UAP Holding Corp. last year. It is now the largest agriculture retailer in North America. The Canadian company’s U.S. takeovers have not gone smoothly, especially the Royster Clark acquisition, which turned hostile and forced Agrium to sweeten its offer before the deal closed.

In rejecting the Agrium offer, CF has promised to keep pursuing its separate, but also hostile, bid for Sioux City, Iowa-based Terra Industries Inc. Terra has also repeatedly rejected CF’s overtures.

Agrium has argued that a CF-Terra combination isn’t in the best interest of shareholders and is making its offer conditional on CF dropping plans to acquire its U.S. rival. CF says a takeover by Agrium is not the best fit for the U.S. company since Agrium derives 55 percent of its revenues from the retail business, where CF and Terra are primarily fertilizer producers. Agrium counters that the business case for a merger with CF is clear and such a deal could also lead to $150 million in operating efficiencies if the two companies combine.

(Source: Medicine Hat News)

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