Fertile Territory

Agrium bids $3.4B for CF, seeking to bust up the target's own offer for Terra.
If you're looking for signs that the world economy will resume its growth, you might find them in the fertilizer industry. While the group does have recession-resistant characteristics -- people have to eat -- the current spate of takeover activity is a sign that the companies think investors are underestimating their prospects.

On Wednesday, Canadian agricultural products company Agrium (nyse: AGU - news - people ) said it had submitted an unsolicited $3.4 billion cash-and-stock takeover bid to American rival CF Industries Holdings as a way to widen its footprint in the nitrogen and phosphate fertilizer markets. CF, which was noncommital, would have to abandon its bid for smaller rival Terra Industries as a condition of the offer.

Shares of CF Industries Holdings (nyse: CF - news - people ) jumped $6.70, or 12.1%, to $62.28, in afternoon trading in New York, Agrium fell $3.22, or 8.0%, to $37.08. Terra slipped 3.3%, or 82 cents, to $24.00.

Under the terms of the offer, stockholders of CF would receive one common share of Agrium and $31.70 in cash for each of their shares. The $68.78 per share proposal represents a premium of 10.4% to the current trading price.

"Adding CF's strong North American nitrogen, phosphate and extensive crop nutrient distribution assets to Agrium's broader global wholesale and retail capabilities would greatly enhance our existing portfolio and enable us to create a premier global franchise across the entire agricultural value chain," said Chief Executive Michael M. Wilson of Agrium, adding that combined revenues would be almost $14.0 billion.

But the bid is conditioned on CF dropping its hostile takeover offer for Terra Industries (nyse: TRA - news - people ) made in mid-January, which Terra rejected later that month. (See "CF Courts Terra With A $2B Offer.") In early February, CF Industries vowed to go hostile with its bid, now worth $2.9 billion. Terra said CF's all-stock bid undervalues Terra and would not create value for shareholders of either company.

CF said its directors will evaluate Agrium's proposal carefully and advise its shareholders in due course. While it may prefer to buy Terra, a deal in which it would be the top dog, the Agrium bid makes a certain amount of sense.
..forbes.com