Terra plan unlikely to ruffle CF; takeover bids for iPCS and Allion fall short of outlooks

By Cristal Cody

Tupelo, Miss., Oct. 19 - Terra Industries Inc. came out fighting on Monday against a hostile takeover attempt by CF Industries Holdings, Inc. by partnering on some fertilizer production facilities with Agrium Inc.

The partnership is contingent upon Agrium completing its hostile takeover bid of CF Industries, but the new maneuver doesn't really change the game for CF Industries, an analyst told Prospect News.

Also on Monday, Sprint Nextel Corp. said Monday it will buy out iPCS, Inc. for $24.00 a share.

While the bid represents a 34% premium to the closing stock price of iPCS shares on Friday, the offer is less than half of what investors originally thought the company could fetch, an analyst said in an interview.

In other situations, Allion Healthcare, Inc. said that it will be taken private for $6.60 a share in cash, a bid much lower than what one analyst expected.

Meanwhile, equities rallied on Monday.

The Dow Jones Industrial Average added 96.28 points, or 0.96%, to close at 10,092.19.

The Standard & Poor's 500 index rose 10.23 points, or 0.94%, to 1,097.91, and the Nasdaq Composite index closed up 19.52 points, or 0.91%, at 2,176.32.

Fertilizer fight carries on

The three-way battle between Terra, CF Industries and Agrium is expected to continue for some time, an analyst said in an interview Monday.

Terra, a Sioux City, Iowa-based fertilizer company, said it will pay $250 million for a 50% interest in Agrium's Carseland, Alta.-based nitrogen production facility and some U.S. assets - if it can raise $600 million of debt capital and Agrium completes its acquisition of CF Industries.

Terra also said that it plans to use part of the proceeds from an issue of senior notes due 2019 to pay the special $7.50-a-share dividend the company announced in September.

Calgary, Alta.-based agricultural company Agrium said in a statement on Monday that it expects the Carseland facility partnership to resolve any regulatory concerns under Canadian competition law in its takeover of CF Industries. Agrium also expects to refile its deal notification with the U.S. Federal Trade Commission.

In addition, Agrium extended its tender offer of $40.00 in cash plus one Agrium share per CF Industries share to Nov. 13. As of Friday, 9.1 million shares of CF Industries stock had been tendered, Agrium said.

"These actions will enable us to keep moving forward with the acquisition of CF Industries," Agrium president and chief executive officer Mike Wilson said in the statement. "We believe CF stockholders strongly support our offer, and we will continue to press CF to engage with Agrium."

CF Industries stuck to its plans for a deal with Terra and its rejection of a merger with Agrium.

"Terra's announcement of a conditional acquisition does not change anything and only increases CF Industries' confidence that Terra stockholders will support CF Industries' proposal by voting for our nominees," CF Industries said in a statement released to Prospect News. "Whether or not Agrium's announcement resolves its regulatory issues, it does not change the fact that Agrium's offer remains very far from compelling."

Deerfield, Ill.-based CF Industries has three nominees up for election to Terra's board of directors at the company's annual shareholders meeting on Nov. 20.

Terra has rejected CF Industries' offer of 0.465 of a share of CF Industries for each share of Terra for a stock transaction valued at more than $3.5 billion.

An analyst told Prospect News on Monday that Terra and Agrium's facility deal provides pressure on CF Industries to accept Agrium's offer, but that's about all.

"If CF keeps saying no, there's nothing they can really do," the analyst said. "Are CF shareholders disappointed? Yeah, but it doesn't change anything. I think this is going to be a very long process."

CF Industries shares gained $4.32, or 4.77%, to close at $94.95, while Terra's stock fell $1.04, or 2.86%, to $35.32.

Agrium shares closed up $4.08, or 7.65%, at $57.42 on Monday.

iPCS shares jump on bid

Shares of iPCS jumped $6.00, or 33.56%, to close at $23.88 on Monday after Sprint Nextel said it will acquire the wireless network service company for $831 million, including the assumption of $405 million of net debt.

Sprint Nextel plans to launch a cash tender offer, and iPCS shareholders with 9.5% of outstanding shares have agreed to tender their shares and vote in favor of the merger.

"iPCS has basically been for sale for four-plus years - people have been waiting on this transaction," Jonathan Schildkraut, an analyst with Jefferies & Co., told Prospect News on Monday. "When it was initially thought there was a potential deal out there, they were talking $60.00, $70.00 a share. Now it's four years later and we're at less than half of that."

There's a chance not all shareholders will favor the terms, and the "market believes the investors will go back and ask for more," Schildkraut said.

Shares of iPCS have traded as low as $3.27 and as high as $24.25 over the past year.

Sprint Nextel and iPCS expect to complete the acquisition late in the fourth quarter or early next year.

As part of the agreement, the companies said they will seek an immediate stay of all pending litigation between them that was related to Sprint's 2005 acquisition of Nextel Communications Inc. Also, Overland Park, Kan.-based Sprint Nextel no longer will be required to divest a portion of its network in some iPCS territories.

Schaumburg, Ill.-based iPCS' mobile network products and services are sold under Sprint's brand name and in Sprint stores in 81 markets.

"We are very pleased to have reached this agreement with Sprint Nextel. Given the increasingly competitive landscape, we believe this is an opportune time to provide our shareholders with a liquidity event at a very attractive price," Timothy M. Yager, president and CEO of iPCS, said in a statement.

Sprint Nextel's stock fell 3 cents, or 0.86%, to $3.44 on Monday.

Allion to go private

Allion Healthcare said late Sunday that it will be taken private by an affiliate of middle-market private investment firm H.I.G. Capital, LLC for $278 million, including the assumption of $79 million in debt.

The board of directors of the Melville, N.Y.-based HIV/AIDS drug provider unanimously approved Miami-based H.I.G.'s bid, which represents a premium of 21.3% over Friday's closing share price of $5.44.

Parallex LLC and other shareholders that hold 41.1% of Allion's outstanding shares have agreed to vote in favor of the merger.

The transaction is expected to close in the first quarter of 2010, subject to regulatory approvals.

Mark Arnold, an analyst with Piper Jaffray & Co., told Prospect News on Monday that the price is less than what he expected.

"We were not surprised that the deal happened, but it's a little lower than what I would have expected," said Arnold, who had a $9.50 stock target price on Allion shares. "But given the fact that 41% have signed on in favor of this deal, there's probably a high likelihood this transaction will be completed."

Allion shares climbed $1.04, or 19.12%, to close at $6.48 on Monday. The stock has traded from $2.60 to $7.74 over the past year.

Mentioned in this article:

Allion Healthcare, Inc. Nasdaq: ALLI

Agrium Inc. NYSE: AGU

CF Industries Holdings, Inc. NYSE: CF

iPCS, Inc. Nasdaq: IPCS

Sprint Nextel Corp. NYSE: S

Terra Industries Inc. NYSE: TRA

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