Engineering News

Prodded by Agrium, CF Pushes Terra for a Deal
November 23, 2009, 1:04 pm

The nearly yearlong, three-way takeover dance by the rival fertilizer makers Terra Industries, CF Industries Holdings and Agrium continued on Monday after Terra seated three CF elected directors on its board but rejected CF’s offer as inadequate.

CF did make clear that it was willing to negotiate its price for Terra. Agrium, meanwhile, reiterated that it thought it had received strong support from CF shareholders in its hostile bid for CF Industries.

CF said it had discussed its offer with Terra after it elected its three members to Terra’s board last week. CF called Terra on Friday and said it was willing to negotiate its last offer for the company, which stands at $4.05 billion, according to a person close to the situation.

CF was so confident of its bid for Terra that it said it would even include a “go shop” provision in any merger agreement, which would allow Terra to actively seek other offers for 30 days after it signed a deal with CF. The “go shop” provision would be quite unusual in a merger agreement.

CF pushed Terra to make a decision quickly, given that its financing agreement with the banks expires by Nov. 30. CF could receive an extension, but that is subject to conditions in the current volatile financing market. If CF did lose its financing, the entire deal could collapse.

Terra announced Sunday night that it had reviewed CF’s terms and rejected them, calling CF’s latest offer inadequate.

Terra also took an unusual step after it seated CF’s three directors. It expanded its board to 11 members from eight and put back on its board the three directors who lost their seats to the CF-backed slate last week.

It was unclear whether Terra was stalling to draw a white-knight bidder or whether it was pressing CF to come up with a higher bid. One possible white knight for Terra is Yara International of Norway, another fertilizer maker, but there has been no indication that Yara is interested in doing a deal.

Agrium of Canada, meanwhile, continued to pursue its offer for CF Industries. About 62 percent of CF’s shareholders tendered their shares in support of an Agrium takeover last week. Still, CF did not even respond to Agrium’s calls this weekend, according to a person familiar with the situation.

While the tender offer shows that a clear majority of CF’s shareholders are in favor of a tie-up, CF’s management seems unwilling to entertain Agrium’s “best and final offer” of about $4.5 billion.

Agrium emphasized on Monday that it received more shareholder support in its bid for CF Industries than CF received for its directors for Terra.

“Agrium is emboldened by the overwhelming support it received from CF stockholders, with 60 percent of CF shares (excluding Agrium’s shares of CF) tendered to our very clear and unambiguous offer,” Mike Wilson, Agrium’s president and chief executive, said in a statement. “In comparison, we understand that the votes received by CF’s nominees for the Terra board represented the votes of only 38 percent of Terra’s outstanding shares, after adjusting for the 7 percent of Terra shares purchased by CF ahead of the vote.”

He added, “The Terra vote was about engagement, while Agrium’s tender offer results were a referendum on concluding a defined transaction at a specific price.”

Source: The New York Times

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