No regulatory hurdles seen for Suncor, Petro-Canada; CF sweetens Terra bid; Cox Radio gets offer

By Cristal Cody

Tupelo, Miss., March 23 - Suncor Energy Inc.'s plans to acquire oil and gas company Petro-Canada for $15.5 billion should meet with little regulatory resistance, an analyst told Prospect News on Monday.

In other action, CF Industries Holdings, Inc. upped its offer for Terra Industries Inc. and again rejected Agrium Inc.'s offer on Monday, providing plenty of fodder for investors to chew.

While Cox Enterprises, Inc. on Monday offered a cash bid of $3.80 a share, or about $69.1 million, to take Cox Radio, Inc. private, investors are betting on a higher price and they may be wrong, an analyst said in an interview.

Interline Brands, Inc.'s adoption of a shareholder rights plan is a good thing, especially because the stock has fallen and the company's major competitors hold more than enough available cash for a buyout, an analyst said Monday.

Moving to Wall Street, investors sent stocks soaring after plans were announced to help banks remove toxic assets from the books.

The Dow Jones Industrial Average jumped 497.48 points, or 6.84%, to close at 7,775.86.

The broader indexes also shot up on Monday.

The Standard & Poor's 500 index gained 54.38 points, or 7.08%, to finish at 822.92, and the Nasdaq Composite index added 98.50 points, or 6.76%, to close at 1,555.77.

Energy companies join forces

The combination of Calgary, Alta.-based energy companies Suncor and Petro-Canada will unite two of Canada's biggest oil companies.

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.

Suncor shares lost 52 cents, or 2.06%, to close at $24.77 on Monday, while Petro-Canada shares gained $5.07, or 21.12%, to close at $29.08.

Randy Ollenberger, an analyst with BMO Nesbitt Burns, told Prospect News that the government or other regulatory agencies should not have a problem with the merger.

"I don't think there's any impediment to the transaction," he said in an interview. "It's a good combination longer-term. Clearly, it provides a fresh take on Petro-Canada's assets and what they're doing. I think it'll go through."

Moody's Investors Service said Monday that it placed Suncor Energy's Baa1 senior unsecured rating under review for possible downgrade and changed Petro-Canada's outlook to developing.

"A key driver of the rating will be Suncor's ability to manage this somewhat disparate collection of assets while continuing with the ambitious growth of both Suncor's and PCA's oils sands businesses, and PCA's non-oil sands businesses, necessitated by PCA's declining production and short reserve life," Terry Marshall, senior credit officer at Moody's, said in a statement.

CF Industries hangs on

Deerfield, Ill.-based CF Industries said Monday that the company is willing to offer an all-stock deal for Terra valued at $30.50 per 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 Industries, a Sioux City, Iowa-based nitrogen provider, had turned down the previous offer valued at $27.50 a share in stock.

Terra spokesman Kim Mathers told Prospect News on Monday that the company has no comment at this point on the new bid.

"Our board of directors will take this under advisement and will publicly announce their decision in due course," she said.

CF Industries, a major producer and distributor of nitrogen and phosphate fertilizer products, said it plans to continue its pursuit to elect three nominees to Terra's board at the company's annual meeting in 2009. Terra must hold its stockholders meeting by May 15.

Stephen Wilson, chairman, president and chief executive officer of CF Industries, said Monday in a conference call with analysts that the company elected to avoid a shareholder vote to provide confidence for Terra shareholders under the threat of Agrium's takeover offer.

"We believe we would get our stockholders' approval. However, we wanted to find a way to take this issue off the table," Wilson said.

CF Industries said the combination with Terra would provide longer-term value for shareholders than the takeover offer from Calgary, Alta.-based fertilizer producer Agrium.

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.

CF Industries said its financial advisers report that Agrium could pay more than $100.00 per CF Industries share and the transaction would still be accretive to Agrium.

The company said Agrium's offer is opportunistic and takes advantage of the decline in share prices across the fertilizer sector.

Raymond Goldie, an analyst with Salman Partners Inc., told Prospect News that is to be expected.

"When CF says this is opportunistic on Agrium's part, they're right, but don't you want your management to be opportunistic?" he said.

Shares of CF Industries gained $3.51, or 5.19%, to close Monday at $71.19.

Terra shares rose 81 cents, or 3.05%, to close at $27.41.

Agrium's stock closed up $2.36, or 6.51%, at $38.62.

Cox Radio buyout

Shares of Cox Radio gained 76 cents, or 23.03%, to close at $4.06 on Monday.

The buyout offer represents a 15.2% premium over the stock's closing price on Friday, though shares have traded as high as $13.09 in the past year.

"It's hard to call it a good share price after the stock's collapse like that. However, it has to be put into perspective of where it is now," James Goss, an analyst with Barrington Research Associates, Inc., told Prospect News. "There is currently a presumption for a higher offer, but how much higher is the question."

Media giant Cox Enterprises already owns a 78% interest and holds a 97% voting interest in Cox Radio. The company plans to fund the buyout with cash on hand and an existing credit facility.

The tender offer expires on April 17.

"Cox Enterprises is committed to operating media businesses, and as a private company can take a long-term perspective, which is especially valuable in the current economic environment," Jimmy Hayes, president and CEO of Cox Enterprises, said in a statement.

Representatives of Cox Radio were not available for comment.

Goss remembers several instances where shareholders held out and lost, including in a buyout plan from Hearst-Argyle Television, Inc.

"Hearst tried to buy back the outstanding shares of Hearst-Argyle at $23.50, and the market presumed a higher offer. Hearst decided not to raise the bid. The bid expired and Hearst-Argyle now is trading at $2.08," Goss said. "So things can always go lower."

Heart-Argyle shares closed up 14 cents, or 6.60%, at $2.26, well off the yearly high of $24.50.

Interline draws swords

Stockholders of Interline Brands liked the board's adoption of a shareholder rights plan and sent shares up 41 cents, or 4.98%, to close at $8.65 on Monday.

The stock has traded from $6.34 to $20.53 over the past year.

Jacksonville, Fla.-based Interline Brands, which distributes and markets maintenance, repair and operations products, said the plan is not in response to any pending offers.

"Interline's board of directors believes the value of the company is not reflected in the current market price of the company's stock, which may make the company vulnerable to abusive takeover tactics," Interline said in the statement.

Under the shareholder rights plan, shareholders will receive the right to buy preferred stock when an investor tries to take control of 15% or more of the company's outstanding common stock.

Unless the rights are redeemed, exchanged or terminated, they will expire on March 22, 2012.

An analyst told Prospect News that the move is good news for investors because of the potential of a takeover.

"There are large well-capitalized competitors with the ability to acquire Interline Brands," the analyst said. "The stock is down, and they didn't want someone to come in and lowball them on an offer."

Interline's competitors include publicly traded W.W. Grainger, Inc. and privately held HD Supply, Inc. and Ferguson Enterprises, Inc.

Shares of Lake Forest, Ill.-based W.W. Grainger shares closed Monday at $70.45, up $3.74, or 5.61%.

Mentioned in this article:

Agrium Inc. NYSE: AGU

CF Industries Holdings, Inc. NYSE: CF

Cox Radio, Inc. NYSE: CXR

Hearst-Argyle Television, Inc. NYSE: HTV

Interline Brands, Inc. NYSE: IBI

Petro-Canada NYSE: PCZ

Suncor Energy Inc. NYSE: SU

Terra Industries Inc. NYSE: TRA

W.W. Grainger, Inc. NYSE: GWW

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