New antitrust process predicted to delay Suncor, Petro-Canada deal; Cox Radio faces lawsuit threat

By Cristal Cody

Tupelo, Miss., March 24 - The union of oil and gas retailers Suncor Energy Inc. and Petro-Canada should make it to the altar, but Canada's merger amendments approved earlier this month to mirror U.S. antitrust reviews are expected to lengthen the approval process, an analyst said Tuesday.

In other action, shares of Terra Industries Inc. rose after the company rejected CF Industries Holdings Inc.'s newest takeover offer valued at about $2.98 billion.

Also on Tuesday, one law firm already is fishing for plaintiffs to file a lawsuit against Atlanta-based Cox Radio, Inc. over a buyout offer made by majority shareholder Cox Enterprises, Inc.

Looking ahead to upcoming proxy fights, Charlotte Russe Holding, Inc. on Tuesday asked investors to vote against a major shareholder's nominees to the board.

The San Diego-based retailer recently put itself up for sale.

Meanwhile, Wall Street's rally on Monday fizzled by Tuesday and investors sent stocks down.

The Dow Jones Industrial Average dropped 115.65 points, or 1.49%, to close at 7,660.21.

The Standard & Poor's 500 index fell 16.67 points, or 2.03%, to 806.25, and the Nasdaq Composite index lost 38.43 points, or 2.47%, to close at 1,517.34.

Canada mimics U.S. process

Petro-Canada is the second-largest retail gas distributor in Canada, and Suncor operates retail outlets in Ontario and in Colorado. Both are based in Calgary, Alta.

Canada's Competition Act, amended on March 12, changes the Canadian review to a U.S. version of antitrust reviews with an initial 30-day waiting period and potential for second requests that extends the wait.

"Although divestments should be relatively easy to structure, in our opinion, we would not rule out an extended review under what will be a new merger review process in Canada," an analyst said Tuesday. "We believe that a second request is possible ... due to the concentration in refining and retail outlets in Ontario."

Under the deal's terms, Petro-Canada shareholders will receive 1.28 shares of the combined company for each share of Petro-Canada, and Suncor shareholders will receive one share of the merged company for each Suncor share.

The deal must receive shareholders' approval, regulatory clearances from governing agencies and court approval from the Court of Queen's Bench of Alberta.

Suncor shares fell $1.67, or 6.72%, to close at $23.17 on Tuesday, while Petro-Canada's stock dropped $1.81, or 6.18%, to close at $27.48.

Terra says no, no, no

Sioux City, Iowa-based nitrogen producer Terra Industries said Tuesday in a letter sent to CF Industries chairman and chief executive Stephen Wilson that the "most recent version of your proposal continues to run counter to Terra's strategic objectives."

Deerfield, Ill.-based CF Industries said Monday that the nitrogen and phosphate company is willing to offer an all-stock deal valued at $30.50 per share, up from its previous stock offers valued at $20.00 and $27.50 a share.

The exchange ratio would range from 0.4129 of a share to 0.4539 of a CF Industries share for each share of Terra.

Terra's stock rose 17 cents, or 0.62%, to close at $27.58 on Tuesday.

Shares of CF Industries jumped $1.11, or 1.56%, to close at $72.30.

CF Industries faces its own takeover attempt from Calgary, Alta.-based fertilizer producer Agrium Inc.

Agrium has offered CF Industries shareholders either one share of Agrium common stock plus $31.70 in cash, 1.7866 Agrium shares or $72.00 in cash per share of CF Industries.

Agrium shares added 12 cents, or 0.31%, to end trading at $38.74 on Tuesday.

Cox offer sparks lawsuit interest

The firm of Howard G. Smith in Bensalem, Pa., said Tuesday it is investigating Cox Radio's board for possible breaches of fiduciary duty and other violations because of the $69.1 million buyout offer from Cox Enterprises.

"Given that the company's shares traded as high as $6.46 per share as recently as Jan. 6, 2009, and over $12.00 per share in 2008, the transaction appears to be unfair and an undervaluation of the company," the firm said in a statement.

Cox Enterprises made the cash offer on Monday to purchase the remaining outstanding stock it does not own for $3.80 a share. The tender offer expires on April 17.

Cox Enterprises already holds a 78% stake in Cox Radio and a 97% voting interest.

Cox Radio said in a statement that the board will appoint a special committee of independent directors to review and consider the tender offer and make a formal statement to shareholders within 10 business days.

On Tuesday, Argus Research Co. downgraded Cox Radio's stock from hold to sell.

Shares dropped 6 cents, or 1.46%, to close at $4.06.

Charlotte Russe begs for time

Charlotte Russe said that Allan Karp, cofounder of private equity firm KarpReilly Capital Partners, LP, is only seeking to position himself with the three nominees to the board.

"We believe he wants to secure an unfair advantage in pursuing a long-term goal of acquiring the company at a favorable price," Charlotte Russe said in a letter to stockholders.

KarpReilly and H.I.G. Capital, LLC made an offer to buy Charlotte Russe for $9.00 to $9.50 a share last year, but the board rejected the offer to try a turnaround plan.

"Today, while the board moves forward with the recently announced sale process, new management is implementing a detailed plan to transform Charlotte Russe into a high-performing, top-tier specialty retailer," the company said in the letter.

Adrienne Tennant, an analyst with Friedman, Billings, Ramsey & Co., said in a research note released to Prospect News that the discount retailer intends later this year to introduce a high-end denim priced at $88.00 to $98.00 versus the company's average clothing price of $10.23.

"We believe that training a customer to shop higher-priced denim at Charlotte Russe would be challenging in a normal retail environment - we believe that it will be exceedingly difficult in the current retail environment," Tennant said. "We would not be surprised to see the shares slip to the $3.00 to $4.00 range without the potential for a takeout."

Charlotte Russe shares fell 50 cents, or 6.60%, to close Tuesday at $7.08.

Mentioned in this article:

Agrium Inc. NYSE: AGU

CF Industries Holdings, Inc. NYSE: CF

Charlotte Russe Holding, Inc. Nasdaq: CHIC

Cox Radio, Inc. NYSE: CX

Petro-Canada NYSE: PCZ

Suncor Energy Inc. NYSE: SU

Terra Industries Inc. NYSE: TRA

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