Risks weigh on Terra takeover; Aladdin deal should clear regulatory reviews; Mentor bid expires

By Cristal Cody

New York, Jan. 16 - Terra Industries Inc. said Friday it will consider a takeover bid from CF Industries Holdings Inc., but analysts say the deal comes with regulatory risks.

In other transactions, regulatory hurdles probably won't hold up the $11.50-a-share takeover offer from Vector Capital for Aladdin Knowledge Systems Ltd., a market source told Prospect News.

Also on Friday, Johnson & Johnson's tender offer for Mentor Corp. expired without a word from the companies by the close of the business day. Johnson & Johnson previously said only 12.1% of shares had been tendered as of Thursday.

Meanwhile, a group of infrastructure investors moved nearer to completing the $7.4 billion buyout of Puget Energy Inc. and subsidiary Puget Sound Energy, Inc., with the deal set to close by Feb. 6.

Looking to the overall markets, the indexes ended the week on a positive note. The Dow Jones Industrial Average rose 68.73 points, or 0.84%, to 8,281.11.

The S&P 500 index rose 6.38, or 0.76%, to 850.12, and the Nasdaq Composite index gained 17.49, or 1.16%, to finish at 1,529.33.

Terra considers CF bid

Terra said Friday it received an unsolicited proposal from CF Industries to acquire the company for 0.4235 shares of CF Industries for each Terra common share, a 22.8% premium over Terra's closing stock price of $16.29 on Thursday.

Shares of Terra gained $4.20, or 25.78%, to close Friday at $20.49.

CF Industries' stock added $1.29, or 2.73%, to $48.52 in trading.

Terra's board said the company will consider the offer, which is valued at $2.1 billion.

Sioux City, Iowa-based Terra produces nitrogen products.

Deerfield, Ill.-based CF Industries said Friday that a combination would create a leading fertilizer business.

"We are hopeful that we can reach a friendly agreement," Stephen Wilson, chairman, president and chief executive officer of CF Industries, said on a conference call with analysts.

Wilson said the deal should receive regulatory approval.

But Jeffrey Zekauskas, an analyst with J.P. Morgan Securities Inc., said in an investors note Friday that the deal comes with regulatory issues because of the controlling share of the nitrogen market.

"We believe that the combined entity would possess roughly a 39% share of the North American nitrogen market," Zekauskas said. "We estimate the global nitrogen market to be approximately 170 million short tons, with North American production of approximately 15 million short tons."

Aladdin shareholders vote Feb. 20

On Friday, Aladdin Knowledge set the shareholders meeting for Feb. 20 to vote on its $160 million buyout.

Regulatory issues probably won't hold up the deal, an analyst who follows the company told Prospect News.

The transaction requires clearance from the German and Israeli antitrust authorities, and it could receive more antitrust reviews because of the company's digital rights management business.

The digital rights management business is "a niche market and this is really a small piece of that," the analyst said. "These companies have been looking at acquiring one or the other for years. Hopefully, that's been thought about in the past."

Shareholders are expected to approve the deal.

"I think the holders are in favor," the analyst said. A combination gives the companies "some leverage in a tough environment, and to have more muscle sure wouldn't hurt."

Analysts don't expect any other bidders to top Vector Capital's offer.

The deal is expected to close within the next two to three months.

Aladdin Knowledge said it plans to release a proxy statement on Jan. 27.

Shares rose 3 cents, or 0.27%, to close Friday at $10.99.

Johnson & Johnson offer

Johnson & Johnson's $31.00-a-share tender offer for Mentor expired Friday.

Representatives of Johnson & Johnson and Mentor did not return calls Friday for additional information.

Johnson & Johnson said it has received all regulatory clearances for the acquisition.

"Everybody expects it to close," Jan Wald, an analyst with the Stanford Group Co., said Friday. "The stock price of Mentor before and the stock price of Mentor now has almost doubled."

Mentor shares closed unchanged at $30.96 Friday. Shares of Johnson & Johnson fell 18 cents, or 0.31%, to end the day at $57.44.

Puget set to close

Shares of Puget Energy gained Friday to close in on the $30.00-a-share takeover offer as confidence grew that the deal will close.

Shares rose $3.37, or 12.85%, to close at $29.60.

The company is being taken private in a $7.4 billion deal by Puget Holdings LLC, a group of infrastructure investors that includes Macquarie Infrastructure Partners, the Canada Pension Plan Investment Board, British Columbia Investment Management Corp., Alberta Investment Management Corp., Macquarie-FSS Infrastructure Trust and Macquarie Capital Group.

The sale has received approval from federal regulators and shareholders.

Mentioned in this article:

Aladdin Knowledge Systems Ltd. Nasdaq: ALDN

CF Industries Holdings Inc. NYSE: CF

Johnson & Johnson NYSE: JNJ

Mentor Corp. NYSE: MNT

Puget Energy Inc. NYSE: PSD

Terra Industries Inc. NYSE: TRA

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