Agrium Stretches Deadline

Calgary-based Fertilizer Company Agrium Inc. (AGU) has again extended its deadline for its hostile offer of $3.9 billion to buy out rival CF Industries Holdings Inc. (CF). Agrium has stretched the deadline to August 19 from the previous deadline of July 22, stating that only about 21% or 10.4 million shares of CF Industries have been tendered and not withdrawn from the exchange offer as of July 17, 2009.

On June 23, CF’s shareholders had tendered about 62% of their total outstanding shares in support of Agrium's current offer of $40 plus one Agrium share per CF share. This was at 59% premium to CF's closing price on February 24, 2009, when the offer was made. Soon after the tender results, Agrium had extended the deadline to acquire CF Industries to July 22, 2009.

CF had repeatedly rejected Agrium’s takeover offer. Despite two upward revisions in the offer price, CF had turned down Agrium primarily on the grounds of substantial undervaluation. CF added that Agrium intends to distract its hostile takeover bid for rival Terra Industries (TRA) that CF Industries is pursuing. Terra, which produces and markets nitrogen products, has repeatedly rebuffed CF’s proposal. However, CF remains committed to acquire Terra.

Agrium also remains committed and has extended the deadline several times. The company has stated that its cash reserves are sufficient and has committed financing to complete the deal. Post acquisition, Agrium would become the world's fourth-largest fertilizer producer.

We rate CF’s shares a Hold and set our six-month target price of $83.00.

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