Agrium rejects $100/share CF bid; Petro-Canada trades at discount; NRG seeks armor against Exelon

By Cristal Cody

Tupelo, Miss., March 27 - Agrium Inc. on Friday raised the cash portion of its takeover offer for CF Industries Holdings, Inc., but don't expect the company to go much higher, Mike Wilson, Agrium's president and chief executive officer, said Friday.

Meanwhile, an analyst said Friday that although Petro-Canada shares are trading at a 9% discount to Suncor Energy Inc.'s $15.5 billion takeover offer, the deal is likely to close.

Also on Friday, NRG Energy Inc. may have come up with a loophole to fight Exelon Corp.'s hostile takeover attempt.

On Wall Street, investors cashed out and sent stocks down.

The Dow Jones Industrial Average lost 148.38 points, or 1.87%, to close at 7,776.18.

The Standard & Poor's 500 index fell 16.92 points, or 2.03%, to 815.94, and the Nasdaq Composite index dropped 41.80 points, or 2.63%, to end Friday at 1,545.20.

CF evaluates latest bid

Agrium said Friday it will offer CF Industries' shareholders an extra $3.30, or 10.4%, for a total of $35.00 in cash and one share of Agrium for each CF Industries share.

Deerfield, Ill.-based CF Industries said earlier in the week that its financial advisers had determined that Agrium could offer $100.00 a share.

"We are not going to $100.00," Wilson said on a conference call with analysts. "We're patient, we're disciplined, and we're not going to overpay for this. If CF does not accept the bid, we assume shareholders will put so much pressure on them they engage with us."

Chuck Nekvasil, spokesman for CF Industries, said in a statement released to Prospect News that the company's board "will evaluate the revised proposal in the context of CF Industries' strategic plans to create shareholder value, including its proposed business combination with Terra Industries Inc."

CF Industries, a major producer and distributor of nitrogen and phosphate fertilizer products, had rejected Agrium's previous cash portion offer of $31.70 in favor of its own hostile takeover attempt of Terra.

CF Industries raised its bid for Terra for an all-stock deal valued at $30.50 per share based on an exchange ratio that would range from 0.4129 of a share to 0.4539 of a CF Industries share for each share of Terra.

Terra, a Sioux City, Iowa-based nitrogen provider, had turned down the previous offer valued at $27.50 a share in stock.

Agrium's offer is conditioned on CF Industries dropping its hostile takeover attempt of Terra.

Wilson said Agrium's focus is to grow the company across the entire agricultural product chain and that the company plans to "pursue this opportunity [with CF] aggressively."

Calgary, Alta.-based Agrium produces and markets agricultural products and services and manufactures nitrogen and phosphate fertilizers.

Agrium also filed preliminary proxy materials with the Securities and Exchange Commission on Friday to urge shareholders to vote against CF Industries' nominees for directors at the annual shareholders meeting on April 21.

In addition, Agrium filed for regulatory clearance of its acquisition of CF Industries with the Department of Justice and the Federal Trade Commission.

"It's a three-way battle," Raymond Goldie, an analyst with Salman Partners Inc., said Friday in an interview. "Agrium is trying to send the message to shareholders to send a message to the board of CF to abandon its bid for Terra. If CF is successful with Terra, Agrium doesn't want it. There would be regulatory concerns with a three-way merger, whereas I don't think there's much overlap between CF and Agrium."

CF Industries has structured its takeover attempt of Terra to avoid a shareholder vote.

Shares of CF Industries lost 70 cents, or 0.95%, to close at $73.30 on Friday. The stock has traded from $37.71 to $172.99 over the past year.

Agrium shares dropped $1.56, or 3.91%, to close at $38.34.

Terra's stock fell 93 cents, or 3.09%, to end trading at $29.14.

Petro-Canada discount

Petro-Canada shares closed down 62 cents, or 2.15%, on Friday at $28.24, while Suncor's stock lost 48 cents, or 1.98%, to close at $23.81.

The deal between Petro-Canada and Suncor includes a C$300 million breakup fee, but most market sources see the deal heading to completion.

"Suncor and Petro-Canada are committed to the transaction and divestments, if necessary, should be easy to structure," an analyst said Friday. "Petro-Canada shareholders have been pressing for an increase in shareholder value, and the acquisition was the result of a strategic review."

The Calgary, Alta.-based oil and gas companies will merge in a deal that gives Petro-Canada shareholders 1.28 shares of the combined company for each share of Petro-Canada.

NRG hunts for exit

Princeton, N.J.-based NRG Energy said Exelon's proposal to expand its board could trigger debt covenants and force it to refinance $8 billion of debt.

Exelon, a Chicago-based power utility, is asking NRG's shareholders to expand the board by five members to allow 19 directors as part of its fight to take over the company.

NRG, a wholesale power generation company, has rejected Exelon's offer of 0.485 of an Exelon share for each share of NRG for a transaction valued at about $5.58 billion.

Exelon said in a letter sent to NRG that the covenants would not be triggered because the new directors for the expanded board would constitute at most 50% of the board and not a majority.

Shares of NRG gained 22 cents, or 1.27%, to close at $17.59 on Friday.

Exelon shares closed at $45.74, down 15 cents, or 0.33%.

Mentioned in this article:

Agrium Inc. NYSE: AGU

CF Industries Holdings, Inc. NYSE: CF

Exelon Corp. NYSE: EXC

NRG Energy Inc. NYSE: NRG

Petro-Canada NYSE: PCZ

Suncor Energy Inc. NYSE: SU

Terra Industries Inc. NYSE: TRA

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