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Agrium makes play for CF Industries

A major U.S. nitrogen and phosphate maker plans to “carefully evaluate” an unasked-for US$3.6 billion takeover bid from Canadian fertilizer and ag retail giant Agrium.

The Calgary-based company on Wednesday submitted a proposal for a US$72-per-share cash-and-stock bid on CF Industries, a Chicago-area firm whose North American holdings include a major nitrogen fertilizer plant at Medicine Hat, Alta.

“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,” Agrium CEO Mike Wilson said in a release Wednesday.

A merged firm would have “combined revenues of nearly US$14 billion and become a global leader in nutrient production and distribution,” he said. “The acquisition would also triple our phosphate and UAN capacity and further strengthen all aspects of our business.”

The two companies had “serious discussions” about a merger in 2005, shortly before CF went public, Wilson noted in his letter to the U.S. company’s board.

But Agrium’s new offer comes as CF works on its own US$2.1 billion all-stock takeover bid for another major U.S. fertilizer firm, Terra Industries Inc. of Sioux City, Iowa.

Wilson, however, said its marriage proposal offers synergies “well in excess of those contemplated in CF’s proposal to acquire Terra Industries.”

CF’s board said in a separate release Wednesday that it “will evaluate the proposal carefully in the context of CF Industries’ strategic plans to create shareholder value,” such as its offer for Terra.

CF’s board “will make its determination regarding Agrium’s proposal in due course,” the U.S. board said.

Also, Wilson said in light of Agrium’s completed takeover last May of U.S. ag retail giant UAP, Agrium’s proposed CF deal “will not diminish our ability to continue to build on our position as the leading North American agricultural retailer, further expand our potash capacity and advanced technologies business or pursue other strategic opportunities.”

Agrium’s offer would give CF shareholders (NYSE:CF) one Agrium share plus US$31.70 cash in exchange for a CF share. In all, about 56 per cent of the offer would be in Agrium stock.

Agrium said it expects “substantial annual operating synergies” of about US$150 million from a combination with CF within three years of closing. CF stockholders, Agrium said, “will share in the value of those synergies through their continued ownership of 24 per cent of the combined company.”

CF Industries’ other holdings include a major nitrogen fertilizer plant at Donaldsonville, La.; phosphate mining and manufacturing operations in central Florida; and a system of fertilizer terminals, warehouses and “associated transportation equipment,” mostly in the U.S. Midwest.

CF since 2007 has also held a 50 per cent stake in KeyTrade AG, a global fertilizer trading company based near Zurich, Switzerland.

CF’s own intended takeover target, Terra Industries, also has Canadian holdings, including a major nitrogen fertilizer plant at Courtright, Ont., south of Sarnia. Terra’s other plants are in Iowa, Oklahoma and Missouri; it also owns an ammonia, urea and melamine crystal production facility at Donaldsonville, about 60 km south of Baton Rouge, La.


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