Deerfield-based CF Industries Holdings Inc. (NYSE: CF - News) filed a lawsuit against Terra Industries Inc. (NYSE: TRA - News) to force the company to convene a shareholder meeting for a business combination being pushed by CF.
Fertilizer maker Terra responded that its board has decided to hold an annual meeting on Nov. 19. The company had postponed the meeting when larger rival CF Industries launched an unsolicited bid in April this year. In its statement, CF noted that Terra's last annual general meeting (AGM) was held nearly 16 months ago and according to law, AGMs must be held on an annual basis.
Terra repeatedly rebuffed CF’s takeover bid stating that the offer substantially undervalues the company. CF’s all-stock offer for Terra Industries has expired and the company does not plan to extend the offer because of opposition from Terra's board. However, CF stated that it continues to pursue Terra.
CF is offering a 35% premium in an all-stock takeover bid. The company raised its offer this month to 0.465 shares of CF for each share of Terra, which makes and sells nitrogen products. In January, CF had made an offer valued at around $2.1 billion, raising it in March to about $2.2 billion.
CF is a holding company for CF Industries, which sells nitrogen and phosphate fertilizers. CF is itself fending off a hostile bid from larger Canadian rival Agrium Inc. (NYSE: AGU - News). CF maintains that Agrium's offer undervalues the company. CF also believes that Agrium intends to distract its hostile takeover bid for Terra.
Tuesday, September 1, 2009
Saturday, August 29, 2009
Analyst downgrades Mosaic
Analysts at UBS Investment Research on Friday downgraded its rating for The Mosaic Co. from buy to neutral, citing the rising stock price and more modest expectations for a rebound in potash demand.
New York-based UBS also cut its price target for Plymouth-based Mosaic (NYSE: MOS) to $53 per share, down from $55. The fertilizer producer’s stock closed at $51.38 on Thursday.
Analysts Don Carson and David Silver now project earnings of $3 per share for full-year fiscal 2010, down from its previous estimate of $3.15. They also reduced their full-year 2011 earnings forecast to $4.30 per share from $4.45.
In a research report, the analysts said potash supply “remains plentiful at the producer level, but we detect few signs of upward movement in potash prices in any major markets.”
They expect prices to remain stable for the next several quarters, while volume starts to recovery. “A return to meaningful producer pricing power appears at least one to two years away.”
UBS also downgraded one of Mosaic’s leading competitors, Saskatoon, Saskatchewan-based Potash Corp. of Saskatchewan Inc. (NYSE: POT), from buy to neutral.
New York-based UBS also cut its price target for Plymouth-based Mosaic (NYSE: MOS) to $53 per share, down from $55. The fertilizer producer’s stock closed at $51.38 on Thursday.
Analysts Don Carson and David Silver now project earnings of $3 per share for full-year fiscal 2010, down from its previous estimate of $3.15. They also reduced their full-year 2011 earnings forecast to $4.30 per share from $4.45.
In a research report, the analysts said potash supply “remains plentiful at the producer level, but we detect few signs of upward movement in potash prices in any major markets.”
They expect prices to remain stable for the next several quarters, while volume starts to recovery. “A return to meaningful producer pricing power appears at least one to two years away.”
UBS also downgraded one of Mosaic’s leading competitors, Saskatoon, Saskatchewan-based Potash Corp. of Saskatchewan Inc. (NYSE: POT), from buy to neutral.
Sector Snap: Fertilizer cos. drop on farmer woes
NEW YORK (AP) -- A near-record corn crop is going to cut demand for fertilizers, said a UBS analyst Friday as he downgraded two fertilizer companies, just as the government sees U.S. farmers' incomes dropping.
Related Quotes
Symbol Price Change
ADM 28.62 +0.41
AGU 48.37 +0.61
BG 68.75 +0.16
CF 82.12 -0.06
IPI 24.70 -0.17
The Agriculture Department said Thursday that farmers' net income will drop 38 percent to $54 billion this year from 2008. That's $9 billion below the average net farm income over the past 10 years.
Dropping incomes mean farmers will have less money to spend on fertilizers.
Moreover, the U.S. government expects a record soybean crop this year and the second-biggest corn crop ever -- despite a 30-35 percent decline in shipments of potash, a key fertilizer, according to UBS analyst Don Carson.
"This makes us less confident of a complete recovery in potash consumption," he said in a research note. Potash prices have also stabilized at lower levels after India made a major purchase at $460/tonne in early July and Brazil spot sales were $525/tonne. At the time of the India buy, spot prices were between $700 and $750 per tonne. Carson doesn't expect prices to head back up soon.
He downgraded Mosaic Co. and Potash Corp. of Saskatchewan Inc. to "Neutral" from "Buy."
Mosaic shares fell $1.84, or 3.6 percent, to $49.54, while Potash dropped $2.02, or 2.1 percent, to $90.60. Other fertilizer companies were also lower. Agrium Inc. slipped 31 cents to $47.45; CF Industries Holdings fell $1.11 to $81.07; Intrepid Potash Inc. declined 40 cents to $24.47; and Terra Industries Inc. fell 41 cents to $32.66.
Other agribusiness companies were mixed. Crop producer and biofuel maker Archer Daniels Midland Co. rose 54 cents to $28.75, while Monsanto Co., the world's biggest seed company, dropped $1.82 to $82.80. Bunge Ltd., which has fertilizer, seed and consumer foods units, dipped 6 cents to $68.53.
Related Quotes
Symbol Price Change
ADM 28.62 +0.41
AGU 48.37 +0.61
BG 68.75 +0.16
CF 82.12 -0.06
IPI 24.70 -0.17
The Agriculture Department said Thursday that farmers' net income will drop 38 percent to $54 billion this year from 2008. That's $9 billion below the average net farm income over the past 10 years.
Dropping incomes mean farmers will have less money to spend on fertilizers.
Moreover, the U.S. government expects a record soybean crop this year and the second-biggest corn crop ever -- despite a 30-35 percent decline in shipments of potash, a key fertilizer, according to UBS analyst Don Carson.
"This makes us less confident of a complete recovery in potash consumption," he said in a research note. Potash prices have also stabilized at lower levels after India made a major purchase at $460/tonne in early July and Brazil spot sales were $525/tonne. At the time of the India buy, spot prices were between $700 and $750 per tonne. Carson doesn't expect prices to head back up soon.
He downgraded Mosaic Co. and Potash Corp. of Saskatchewan Inc. to "Neutral" from "Buy."
Mosaic shares fell $1.84, or 3.6 percent, to $49.54, while Potash dropped $2.02, or 2.1 percent, to $90.60. Other fertilizer companies were also lower. Agrium Inc. slipped 31 cents to $47.45; CF Industries Holdings fell $1.11 to $81.07; Intrepid Potash Inc. declined 40 cents to $24.47; and Terra Industries Inc. fell 41 cents to $32.66.
Other agribusiness companies were mixed. Crop producer and biofuel maker Archer Daniels Midland Co. rose 54 cents to $28.75, while Monsanto Co., the world's biggest seed company, dropped $1.82 to $82.80. Bunge Ltd., which has fertilizer, seed and consumer foods units, dipped 6 cents to $68.53.
Monday, August 24, 2009
Buy Puts for Potash
BUY LOW AND SELL HIGH is the most basic investment advice, and yet most people have a hard time following it.
When stock prices are high, investors like to chase stocks higher, paying top dollar for what they perceive as an opportunity to make top dollar on a high-flying stock.
When prices are falling, investors have a hard time admitting that the stock they thought was a high-flyer is now a dud. Few investors have the discipline to admit a mistake and lock in a loss by selling.
But here's an opportunity for investors comfortable with options trading to use the tricks of the pros. Barclay's Capital told clients this morning that shares of Potash (POT) are richly valued compared to agricultural commodity prices as well as to potash, a type of salt that is used as fertilizer to improve water retention and crop yields.
Venu Krishna, a Barclay's derivatives strategist, recommends shorting Potash stock, or buying puts on the stock. The firm likes December 90 puts.
The stock was recently about $98, up more than 100% from its 52-week low of $47.54.
At the same time -- and this part of the trade is best left alone if you don't identify yourself as a trader on your tax returns - - pairing the trade with a ratio of long soybean futures and Standard & Poor's 500 Index.
The layered trade is so complicated and capital intensive that it can be completed by only a few people on Wall Street. We mention the trade in its entirety only to reveal the institutional footprints in the market.
According to Barclay's, potash, the commodity, is expensive based on its historical relationship with corn and soybean prices, and also to its peers. Meanwhile, July potash inventories were 127% higher than the five year average.
"Due to its higher cost, potash demand is suffering much more than other fertilizers as farmers try to reduce cost," Krishna said.
Major emerging markets, including India and China, negotiate fertilizer prices. India got a 26% price cut from Potash in July. India will pay $460 a ton for its annual potash needs, compared to $600 a ton in the previous year. India negotiated its rate when the spot price was $700.
China is currently having discussions with major producers. Traders will find it hard to ignore prices that are so much lower than in the commodities market.
Despite this overhang, Krishna says Potash trades at a 16.5 multiple of forward enterprise value/EBITDA, or earnings before interest taxes depreciation and amortization, compared with about 10 for its peers...barrons online
When stock prices are high, investors like to chase stocks higher, paying top dollar for what they perceive as an opportunity to make top dollar on a high-flying stock.
When prices are falling, investors have a hard time admitting that the stock they thought was a high-flyer is now a dud. Few investors have the discipline to admit a mistake and lock in a loss by selling.
But here's an opportunity for investors comfortable with options trading to use the tricks of the pros. Barclay's Capital told clients this morning that shares of Potash (POT) are richly valued compared to agricultural commodity prices as well as to potash, a type of salt that is used as fertilizer to improve water retention and crop yields.
Venu Krishna, a Barclay's derivatives strategist, recommends shorting Potash stock, or buying puts on the stock. The firm likes December 90 puts.
The stock was recently about $98, up more than 100% from its 52-week low of $47.54.
At the same time -- and this part of the trade is best left alone if you don't identify yourself as a trader on your tax returns - - pairing the trade with a ratio of long soybean futures and Standard & Poor's 500 Index.
The layered trade is so complicated and capital intensive that it can be completed by only a few people on Wall Street. We mention the trade in its entirety only to reveal the institutional footprints in the market.
According to Barclay's, potash, the commodity, is expensive based on its historical relationship with corn and soybean prices, and also to its peers. Meanwhile, July potash inventories were 127% higher than the five year average.
"Due to its higher cost, potash demand is suffering much more than other fertilizers as farmers try to reduce cost," Krishna said.
Major emerging markets, including India and China, negotiate fertilizer prices. India got a 26% price cut from Potash in July. India will pay $460 a ton for its annual potash needs, compared to $600 a ton in the previous year. India negotiated its rate when the spot price was $700.
China is currently having discussions with major producers. Traders will find it hard to ignore prices that are so much lower than in the commodities market.
Despite this overhang, Krishna says Potash trades at a 16.5 multiple of forward enterprise value/EBITDA, or earnings before interest taxes depreciation and amortization, compared with about 10 for its peers...barrons online
CF Extends Terra Deadline
CF Industries Holdings (NYSE: CF - News) announced today that it has extended the expiration date of its exchange offer for all of the outstanding shares of Terra Industries (NYSE: TRA - News) common stock until Aug. 31. The offer was scheduled to expire at 5:00 p.m. Eastern time on Aug. 21.
Since January this year, the Illinois-based fertilizer company has been wooing its Iowa-based rival Terra in an all-stock deal for a total of $2.1 billion. Under the original proposal, each common share of Terra would have been entitled to receive 0.4235 shares of CF. However, Terra rejected the offer for the second consecutive time on Mar. 5, saying it undervalued the company.
In response, CF increased its offer price on March 9, to $2.77 billion based on $27.50 for each Terra share and again on March 23, to $3.07 billion based on $30.50 each by agreeing both times to an exchange ratio of not less than 0.4129 and not more than 0.4539 of each of CF’s share.
The third offer of $30.50 per Terra share was a premium of over 85% to Terra’s stock price before CF made the original offer on Jan. 15. Terra, however, again rejected CF’s offer the next day, citing the same reason of undervaluation.
In the beginning of August, CF sweetened the deal by raising the fixed exchange ratio to 0.465 shares of CF Industries for each Terra common share. This would bring about $1 billion in cash to shareholders of the combined company after the proposed deal closes. It would also distribute 5 million contingent future shares to CF stockholders. The contingent shares would be converted into CF stock if the stock trades at more than $115 per share over a certain period after the completion of the potential transaction.
As of Aug. 20, about 11.5 million shares of Terra common stock had been tendered into the exchange offer. CF anticipates the proposed bid to produce annual cost savings of $105 million–$135 million.
We recommend the shares of CF as Neutral.
Since January this year, the Illinois-based fertilizer company has been wooing its Iowa-based rival Terra in an all-stock deal for a total of $2.1 billion. Under the original proposal, each common share of Terra would have been entitled to receive 0.4235 shares of CF. However, Terra rejected the offer for the second consecutive time on Mar. 5, saying it undervalued the company.
In response, CF increased its offer price on March 9, to $2.77 billion based on $27.50 for each Terra share and again on March 23, to $3.07 billion based on $30.50 each by agreeing both times to an exchange ratio of not less than 0.4129 and not more than 0.4539 of each of CF’s share.
The third offer of $30.50 per Terra share was a premium of over 85% to Terra’s stock price before CF made the original offer on Jan. 15. Terra, however, again rejected CF’s offer the next day, citing the same reason of undervaluation.
In the beginning of August, CF sweetened the deal by raising the fixed exchange ratio to 0.465 shares of CF Industries for each Terra common share. This would bring about $1 billion in cash to shareholders of the combined company after the proposed deal closes. It would also distribute 5 million contingent future shares to CF stockholders. The contingent shares would be converted into CF stock if the stock trades at more than $115 per share over a certain period after the completion of the potential transaction.
As of Aug. 20, about 11.5 million shares of Terra common stock had been tendered into the exchange offer. CF anticipates the proposed bid to produce annual cost savings of $105 million–$135 million.
We recommend the shares of CF as Neutral.
Thursday, August 20, 2009
Monsanto Fights Back
There's mud getting slung down on the farm. Monsanto (NYSE: MON) and DuPont (NYSE: DD) have escalated their squabble over DuPont's license of Monsanto's Roundup Ready gene.
Monsanto gave DuPont a license to use the technology but doesn't want its competitor to combine the trait with a similar gene developed by DuPont. That's understandable, considering that the combined seed would likely result in crops superior to Roundup Ready alone. DuPont cried foul, claiming Monsanto has a monopoly. Monsanto went to court last May, but the war of words has just begun.
Monsanto's CEO Hugh Grant reportedly sent a letter to DuPont Chairman Charles Holliday Jr. this week characterizing DuPont's allegations that Monsanto has a monopoly as "misleading to the public and a serious breach of business ethics far beyond honest competitor behavior." Them's fightin' words.
Monsanto is upset that DuPont is supporting organizations that are attacking Monsanto. It's is kind of an easy target, and even some of my fellow Fools aren't too fond of the company.
I'm not convinced that Monsanto is to blame here, though. It's not like Monsanto isn't capable of getting along with its rivals. It's developing a new corn combining its traits with those of Dow Chemical (NYSE: DOW). Monsanto has also swapped licenses with Syngenta (NYSE: SYT) and has a deal with BASF to discover new traits.
It seems to me that the patent holder should be able to license -- or not -- the technology to whatever companies it wants and be able to limit the scope of those partnerships. No one seems to be complaining that Pfizer (NYSE: PFE) combined its Lipitor drug with a high blood pressure drug to make Caduet, but it hasn't licensed the blockbuster drug to any of its competitors that I know of..Brian Orelli
Monsanto gave DuPont a license to use the technology but doesn't want its competitor to combine the trait with a similar gene developed by DuPont. That's understandable, considering that the combined seed would likely result in crops superior to Roundup Ready alone. DuPont cried foul, claiming Monsanto has a monopoly. Monsanto went to court last May, but the war of words has just begun.
Monsanto's CEO Hugh Grant reportedly sent a letter to DuPont Chairman Charles Holliday Jr. this week characterizing DuPont's allegations that Monsanto has a monopoly as "misleading to the public and a serious breach of business ethics far beyond honest competitor behavior." Them's fightin' words.
Monsanto is upset that DuPont is supporting organizations that are attacking Monsanto. It's is kind of an easy target, and even some of my fellow Fools aren't too fond of the company.
I'm not convinced that Monsanto is to blame here, though. It's not like Monsanto isn't capable of getting along with its rivals. It's developing a new corn combining its traits with those of Dow Chemical (NYSE: DOW). Monsanto has also swapped licenses with Syngenta (NYSE: SYT) and has a deal with BASF to discover new traits.
It seems to me that the patent holder should be able to license -- or not -- the technology to whatever companies it wants and be able to limit the scope of those partnerships. No one seems to be complaining that Pfizer (NYSE: PFE) combined its Lipitor drug with a high blood pressure drug to make Caduet, but it hasn't licensed the blockbuster drug to any of its competitors that I know of..Brian Orelli
Wednesday, August 19, 2009
Deere outlook overshadows Q3 beat; shares fall
* Fiscal 3rd qtr better than expected
* Full-year forecast implies disappointing 4th qtr
* Shares down more than 3.5 pct (Recasts; adds details from conference call, updates shares)
By James B. Kelleher
CHICAGO, Aug 19 (Reuters) - Deere & Co (DE.N) warned on Wednesday that it would barely break even in the current quarter as continued weakness in its construction equipment business and sharp drops in overseas demand for farm equipment forced it to cut production by a third.
The news sent its shares down more than 3.5 percent.
The warning came as Deere reported a higher-than-expected third-quarter profit as better-than-expected performance in its core agriculture machinery business, as well as its in-house finance arm, helped to offset sluggish sales in construction and forestry equipment.
The world's largest maker of tractors and harvesters, which said it was taking "pretty significant shutdowns" during the quarter in anticipation of lower demand next year, reported a third-quarter profit of $420 million, or 99 cents a share, down from $575.2 million, or $1.32 a share, last year. Sales fell 24 percent to $5.89 billion.
Analysts, on average, had expected the company to report a profit of 56 cents per share on sales of $5.27 billion.
Analyst Eli Lustgarten of Longbow Research called the results "a clean beat," although 20 cents of the earnings came from nonoperating items, including a lower tax rate.
Moline, Illinois-based Deere reiterated its forecast for a full-year net profit of "approximately $1.1 billion."
Since Deere has already reported earnings of $1.1 billion for the first nine months of the year, the guidance implied a break-even or possibly even a marginally unprofitable fiscal fourth quarter.
"They're burying the fourth quarter with these production cuts," Lustgarten said. "And so their guidance is for a marginally break-even quarter."
During a conference call to discuss the earnings, Deere said the production cuts would result in one-third fewer production days during the quarter.
Because the fixed costs associated with those idled plants would not go away during the shutdowns, analysts warned, however, the company's actions were likely to pressure margins in the current quarter.
Analysts had expected Deere to report a fourth-quarter profit of 33 cents a share, according to Reuters Estimates.
Deere also cut its forecast for corn prices for the 2009-2010 crop year to $3.40 a bushel, down from a previous forecast of $3.80. That is up from its current price of about $3.12 a bushel, but down 59 percent from the record highs touched last summer.
Since farm equipment purchases are highly correlated with crop prices and the cash receipts they represent, that was likely to translate into less demand for the tractors and harvesters produced by Deere and its top rivals, Fiat Spa (FIA.MI) subsidiary CNH Global NV (CNH.N) and Agco Corp (AGCO.N).
With demand from farmers easing, that puts added pressure on Deere's construction and forestry unit, which competes with Caterpillar Inc (CAT.N), Komatsu Ltd (6301.T) and Terex Corp (TEX.N) and has seen demand drop sharply as a result of the worldwide downturn in building.
Deere shares were down about 3.7 percent, or $1.72, at $43.37 in late morning New York Stock Exchange trading. (
* Full-year forecast implies disappointing 4th qtr
* Shares down more than 3.5 pct (Recasts; adds details from conference call, updates shares)
By James B. Kelleher
CHICAGO, Aug 19 (Reuters) - Deere & Co (DE.N) warned on Wednesday that it would barely break even in the current quarter as continued weakness in its construction equipment business and sharp drops in overseas demand for farm equipment forced it to cut production by a third.
The news sent its shares down more than 3.5 percent.
The warning came as Deere reported a higher-than-expected third-quarter profit as better-than-expected performance in its core agriculture machinery business, as well as its in-house finance arm, helped to offset sluggish sales in construction and forestry equipment.
The world's largest maker of tractors and harvesters, which said it was taking "pretty significant shutdowns" during the quarter in anticipation of lower demand next year, reported a third-quarter profit of $420 million, or 99 cents a share, down from $575.2 million, or $1.32 a share, last year. Sales fell 24 percent to $5.89 billion.
Analysts, on average, had expected the company to report a profit of 56 cents per share on sales of $5.27 billion.
Analyst Eli Lustgarten of Longbow Research called the results "a clean beat," although 20 cents of the earnings came from nonoperating items, including a lower tax rate.
Moline, Illinois-based Deere reiterated its forecast for a full-year net profit of "approximately $1.1 billion."
Since Deere has already reported earnings of $1.1 billion for the first nine months of the year, the guidance implied a break-even or possibly even a marginally unprofitable fiscal fourth quarter.
"They're burying the fourth quarter with these production cuts," Lustgarten said. "And so their guidance is for a marginally break-even quarter."
During a conference call to discuss the earnings, Deere said the production cuts would result in one-third fewer production days during the quarter.
Because the fixed costs associated with those idled plants would not go away during the shutdowns, analysts warned, however, the company's actions were likely to pressure margins in the current quarter.
Analysts had expected Deere to report a fourth-quarter profit of 33 cents a share, according to Reuters Estimates.
Deere also cut its forecast for corn prices for the 2009-2010 crop year to $3.40 a bushel, down from a previous forecast of $3.80. That is up from its current price of about $3.12 a bushel, but down 59 percent from the record highs touched last summer.
Since farm equipment purchases are highly correlated with crop prices and the cash receipts they represent, that was likely to translate into less demand for the tractors and harvesters produced by Deere and its top rivals, Fiat Spa (FIA.MI) subsidiary CNH Global NV (CNH.N) and Agco Corp (AGCO.N).
With demand from farmers easing, that puts added pressure on Deere's construction and forestry unit, which competes with Caterpillar Inc (CAT.N), Komatsu Ltd (6301.T) and Terex Corp (TEX.N) and has seen demand drop sharply as a result of the worldwide downturn in building.
Deere shares were down about 3.7 percent, or $1.72, at $43.37 in late morning New York Stock Exchange trading. (
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