Canadian fertilizer giant Agrium Inc.(AGU) made a $3.6 billion hostile bid for U.S. rival CF Industries Holdings Inc.(CF) on Wednesday with the aim of tripling its presence in the global phosphate and nitrogen markets.
The bid, which is a 30% premium to CF's Tuesday close, offers its investors a cash and share deal worth $72 apiece. Each CF share would be exchanged for one Agrium share and $31.70 cash under the proposed terms. However, Agrium said its proposal was conditioned on CF dropping its pursuit of Terra Industries Inc.(TRA).
CF Industries formally made a $2.4 billion hostile bid for Terra on Monday. The Terra board had rejected the offer last month, saying it substantially undervalued the company. CF, however, still remains interested in the deal. The merger of Terra with CF would create the largest global producer of nitrogen-based manure used for most crops.
Agrium Chief Executive Mike Wilson said, '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.
Prices of nitrogen and phosphate fertilizers have declined steadily since the later half of 2008. Under these conditions, if Agrium acquires CF Industries, it would save $150 million in costs and generate revenue of nearly $14 billion annually.
Agrium said its offer is not subject to financing conditions as it has sufficient cash and committed financing underwritten by Royal Bank of Canada and Bank of Nova Scotia to fund the cash portion of the proposal. This helps the company to pursue CF even amid the stringent credit markets. Deerfield, Illinois-based CF Industries said it would evaluate Agrium's offer carefully.
CF Industries jumped more than 12% to $62.40 at noon while Terra fell 4% to $23.85 and Agrium slumped nearly 8% to $37.16 on the New York Stock Exchange..zacks.com
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