Canadian Hydro urges against offer; Terra bid clears review; Schering to air deal vote

By Cristal Cody

Tupelo, Miss., Aug. 6 - Canadian Hydro Developers, Inc. is better suited to a partnership with a clean energy company rather than a hostile union with an electric utility based in fossil fuels, an analyst told Prospect News on Thursday.

Executives of Canadian Hydro on Thursday also urged shareholders to reject TransAlta Corp.'s C$654 million offer.

In other situations on Thursday, as CF Industries Holdings, Inc. predicted, the required antirust waiting period for its offer to acquire Terra Industries Inc. expired at midnight on Wednesday.

As a finale for the week, Schering-Plough Corp. will web cast its special shareholders meeting to approve the $41.1 billion merger with Merck & Co., Inc.

Meanwhile, equities slipped on Thursday.

The Dow Jones Industrial Average fell 24.71 points, or 0.27%, to close at 9,256.26.

The Standard & Poor's 500 index closed down 5.64 points, or 0.56%, at 997.08, while the Nasdaq Composite index fell 19.89 points, or 1.00%, to 1,973.16.

Energy union questioned

Mega electric utility TransAlta launched a hostile tender offer for Canadian Hydro at C$4.55 a share on July 22.

Canadian Hydro, which operates 21 renewable power projects, on Thursday said it is considering other options and mailed a circular to investors to explain why they should avoid TransAlta's offer.

Dennis Erker, chairman of the board of directors of Canadian Hydro, said in a statement that the company would not be sold at a discount.

On a conference call held to discuss Canadian Hydro's rejection of the TransAlta bid on Thursday, Kent Brown, Canadian Hydro's chief executive officer, said the company's stock continues to trade well above the bid.

"The offer is inadequate and it is opportunistic," Brown said. "It doesn't reflect even the value of our current assets, let alone our growth prospects."

TranAlta's tender offer expires on Aug. 27.

Matt Gowing, an analyst with Research Capital, told Prospect News on Thursday that the Calgary, Alta.-based green energy company could do better than a partnership with a fossil fuel-based, mature utility.

Gowing has a stock target price of C$5.50 a share for Canadian Hydro.

"TransAlta can pay more, they should pay more and Canadian Hydro shareholders should hold out," he said. "Canadian Hydro could extract more value for shareholders by hooking up with a clean energy-focused company."

Calgary, Alta.-based TransAlta produces power to sell in Canada, the United States and Australia.

Canadian Hydro shares closed up C$0.11, or 2.23%, at C$5.04 on Thursday.

TransAlta's stock dropped 42 cents, or 2.08%, to $19.77.

Battle for fertilizer

CF said Thursday in a statement that the mandatory waiting period under the Hart-Scott-Rodino Antitrust Improvements Act expired just before midnight Wednesday.

Terra said Wednesday it will consider CF Industries' increased fixed exchange offer of 0.465 shares of CF Industries for each Terra share.

The new offer made by CF Industries on Wednesday values Terra at $3.83 billion, up from CF Industries' earlier proposed exchange offer valued at $2.20 billion.

CF Industries' board also must contend with a $4 billion cash-and-stock offer from agricultural products producer Agrium Inc.

Calgary, Alta.-based Agrium's offer for $40.00 in cash and one share for each CF Industries share expires on Aug. 19.

Sioux City, Iowa-based Terra produces nitrogen for fertilizer products, while Deerfield, Ill.-based CF Industries produces and distributes nitrogen and phosphate fertilizer products.

Shares of CF Industries added 40 cents, or 0.48%, to close at $83.14, while Terra shares fell 6 cents, or 0.20%, to $30.38 on Thursday.

Agrium's stock rose 31 cents, or 0.64%, to $48.96.

Schering shareholders vote

Schering-Plough shareholders are widely expected to approve the merger at Friday's meeting in Boston.

Under the terms, Schering-Plough shareholders will receive $10.50 in cash and 0.5767 of a Merck share for each Schering-Plough share.

Merck and Schering-Plough expect the transaction to close during the fourth quarter.

Kenilworth, N.J.-based Schering-Plough produces prescription medicines, animal health vaccines and consumer health products, while Whitehouse Station, N.J.-based Merck produces a variety of products, including the allergy medicine Singulair.

Shares of Schering-Plough lost 19 cents, or 0.72%, to close at $26.05, while Merck shares slipped 25 cents, or 0.84%, to $29.36 on Thursday.

Mentioned in this article:

Agrium Inc. NYSE: AGU

Canadian Hydro Developers, Inc. Toronto: KHD

CF Industries Holdings, Inc. NYSE: CF

Merck & Co., Inc. NYSE: MRK

Schering-Plough Corp. NYSE: SGP

Terra Industries Inc. NYSE: TRA

TransAlta Corp. NYSE: TAC

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