To create a sort of stockholder straw poll, Agrium sent a communication to CF Industries stockholders on Thursday, Nov. 12, asking them to send a clear message of support for the Agrium offer to purchase CF to the CF Industries board.
“Agrium has made its best and final offer worth $97.47 per CF share (based on Agrium’s closing price of $52.47 on November 11, 2009)," reads the letter. “Tender your shares by November 18, 2009 to send a clear message to the CF Board that you want to receive a premium, not pay one.”
“If we receive your resounding support and CF refuses to act, Agrium will consider all options, including litigation and nominating a slate of directors.”
The text of the letter reads as follows in italics:
Dear Fellow CF Industries Stockholder:
On November 5, 2009, Agrium increased its offer to acquire all of the outstanding shares of CF Industries Holdings, Inc. Our clear and unambiguous offer of $45.00 in cash and one common share of Agrium for each CF share is equivalent to $97.47 per CF share, or total consideration of approximately $4.9 billion, based on Agrium’s closing stock price of $52.47 on November 11, 2009.
Our revised offer represents a 106% premium to CF’s January 15, 2009, price of $47.23, and a premium of over 75% to CF’s closing price of $55.58 on February 24, 2009, the day before Agrium announced its initial proposal. Since Agrium’s initial proposal in February, the total value of our offer has increased approximately $1.3 billion, or 36%.
AGRIUM’S OFFER IS SUPERIOR TO ANY ALTERNATIVE ARTICULATED BY CF
Despite your strong support – and CF’s assurance to leading independent proxy advisory firm RiskMetrics that they would engage – CF has rebuffed Agrium’s efforts and ignored you, its stockholders, for nearly 9 months.
CF’s actions have left us with no choice but to again take our offer directly to you. Only with your overwhelming support do we believe CF’s board will finally be compelled to enter into a merger agreement with Agrium.
The CF board should exercise good corporate governance and allow its stockholders to determine if they want to receive a premium or pay one. After 9 months, it’s time for CF to listen to its stockholders. Tender your shares to tell the CF board you want this deal at this price.
WE HAVE A CLEAR PATH TO COMPLETION
Agrium’s offer is fully financed. We have satisfied all related regulatory issues in Canada, and we expect to complete the resolution of regulatory issues in the U.S. shortly. We have a clear path to completion and are prepared to immediately execute a fully financed, binding merger agreement with CF. Our only impediment is CF’s refusal to act – contrary to your wishes.
AGRIUM’S OFFER IS FINANCIALLY COMPELLING, BY ANY METRIC
1. We are offering a far higher multiple than CF has ever traded.
Our latest offer implies a 2010E ‘owned’ EBITDA multiple of 6.8x, a multiple far greater than CF has ever traded previously. Agrium has historically traded at a premium to CF when using average forward ‘owned’ EBITDA multiples 2 through January 15, 2009, the day before CF made its offer for Terra.
We specifically structured our deal so that our mixed consideration of both stock and cash allows CF stockholders to elect to benefit from both Agrium’s historically strong valuation, upside to the commodity cycle and participation in approximately $150 million of estimated annual operating synergies, while receiving immediate value.
2. CF’s unaffected share price is far below our offer and even current trading levels.
CF’s stock dropped precipitously in the days following Agrium’s revised offer. We believe this occurred for one reason: the market’s recognition that the CF board has refused to listen to or act on its own shareholders’ views on value. If Agrium withdraws, we believe the stock will fall even further. This highlights the importance of sending an unambiguous message by tendering to this offer.
In fact, using the objective approach set forth by RiskMetrics Group3, CF’s unaffected stock price is in the $66 to $70 range. Our offer is $97.47 based on yesterday’s close, with significant upside potential.
3. CF/Agrium: A better combination than CF/Terra across all criteria.
The strategic combination of Agrium and CF would yield greater pro forma 2010E EBITDA4 ($2.3 billion vs. $1.3 billion), a more robust forward-trading multiple 5 (5.1x vs. 4.3x) and a more diversified revenue stream with less exposure to volatile commodities than CF’s proposed acquisition of Terra.