Express Scripts up on WellPoint buyout offer; CF gains RiskMetrics vote; Agrium pushes ahead

By Cristal Cody

Tupelo, Miss., April 13 - The market gave a show of confidence to Express Scripts, Inc.'s stock over the deal announced Monday to buy WellPoint, Inc.'s NextRx subsidiaries for $4.68 billion.

Shares of Express Scripts jumped $7.64, or 15.54%, to close at $56.81 on Monday.

Also on Monday, proxy advisory firm RiskMetrics Group, Inc.'s recommendation that shareholders of CF Industries Holdings, Inc. support CF Industries' three director nominees instead of withholding their votes as urged by Agrium Inc. could prove embarrassing for Agrium, an analyst told Prospect News.

Agrium said in a statement for Prospect News that it disagrees with RiskMetrics' report.

Moving to smaller transactions, Entrust Inc. agreed on Monday to a $114 million buyout by private investment firm Thoma Bravo, LLC, but the company probably will attract a higher offer, an analyst said in an interview.

Meanwhile, stocks were mixed on Monday.

The Dow Jones Industrial Average lost 25.57 points, or 0.32%, to close at 8,057.81.

The broader indexes, though, made gains. The Standard & Poor's 500 index rose 2.17 points, or 0.25%, to 858.73, and the Nasdaq Composite index inched up 0.77 of a point, or 0.05%, to close at 1,653.31.

Express, WellPoint deal

Express Scripts will buy NextRx with cash and up to $1.4 billion of company stock.

"Now more than ever, as the nation focuses on health care reform, this collaboration between Express Scripts and WellPoint represents a shared commitment to achieving optimal health outcomes while driving out wasteful spending," George Paz, chairman and chief executive officer of Express Scripts, said in a statement.

The deal gives St. Louis-based Express Scripts, a pharmacy benefits management company, an edge against competitors such as CVS Caremark Corp. and privately held Medco Health Solutions, Inc.

The NextRx subsidiaries manage more than 265 million adjusted prescriptions annually.

WellPoint, an Indianapolis-based health insurer, expects to use the proceeds to buy back stock and pay down debt.

The transaction also includes a 10-year contract for Express Scripts to provide services to WellPoint.

The transaction is expected to close in the second half of this year and must clear regulatory reviews.

WellPoint's stock rose $3.24, or 8.03%, to close at $43.58.

Woonsocket, R.I.-based CVS shares fell 19 cents, or 0.63%, to close at $29.90.

Agrium loses face

CF Industries has rejected Agrium's unsolicited $3.6 billion takeover offer while it attempts its own hostile takeover of Terra Industries Inc.

RiskMetrics said Agrium's bid is too low and too uncertain to recommend shareholders withhold votes at the annual shareholder meeting on April 21, according to the report released to Prospect News.

"Agrium to date has not followed the hostile M&A rulebook," RiskMetrics said in the report. "It missed the advance notice deadline [and] delayed its HSR filing."

Agrium said in a statement for Prospect News that it remains committed to the CF Industries acquisition.

"We strongly disagree with RiskMetrics' voting recommendation. We are offering a substantial premium and have clearly stated our willingness to raise our offer further if CF can demonstrate additional value," Agrium said.

"We urge CF stockholders to withhold their vote for the CF nominees to send a message that they want the CF board to engage with Agrium and negotiate a mutually beneficial transaction."

The Calgary, Alta.-based agricultural products maker has offered $35.00 in cash and one share of Agrium for each CF Industries share.

Deerfield, Ill.-based CF Industries' board of directors has voted against the offer.

CF Industries, which produces and distributes nitrogen and phosphate fertilizer products, is attempting to buy Terra Industries, a Sioux City, Iowa-based nitrogen provider, in an all-stock deal valued at $30.50 per share.

But CF Industries has structured the hostile takeover attempt of Terra Industries to avoid a shareholder vote, and RiskMetrics didn't let CF Industries completely off the hook.

"Given the extraordinary nature of the CF board's end-run around its own shareholders, we remain concerned about the accountability of the CF board going forward," RiskMetrics said.

"Our recommendation herein is not an endorsement of CF's end-run strategy, and is based on the assumption that the CF board, subject as always to legal liability for breach of fiduciary duty, will keep to its word and fairly evaluate all offers for the company while remaining open to abandoning a Terra transaction if CF shareholders are not broadly supportive of it."

An analyst told Prospect News on Monday that most institutional shareholders usually vote with the proxy firm's recommendations.

"It's almost like losing face for Agrium. They had assumed there would be some support," the analyst said. "The only thing Agrium can do is make the bid more attractive."

CF Industries shares fell 6 cents, or 0.08%, to close at $72.97 on Monday, while shares of Agrium rose $1.06, or 2.76%, to $39.53.

Terra's stock gained $1.01, or 3.69%, to close at $28.41.

Entrust open for suitors

Thoma Bravo will pay Entrust shareholders $1.85 in cash for each Entrust share.

Although Entrust's board has approved the deal, the Dallas-based digital security software company will be allowed to solicit other proposals for the next 30 days.

"I could see it going a little bit higher, but nothing drastic," an analyst told Prospect News on Monday. "This certainly suggests they have been in talks with others. By giving them the 30-day window, they're going to see if any of these others have an appetite and want to pay a little bit more for it."

Entrust shares added 13 cents, or 7.78%, to close at $1.80 on Monday. The stock has traded from 98 cents to $3.41 over the past year, and shares have not reached more than $4.00 since June 2007.

The buyout must be approved by Entrust shareholders and receive regulatory clearance.

Mentioned in this article:

Agrium Inc. NYSE: AGU

CF Industries Holdings, Inc. NYSE: CF

CVS Caremark Corp. NYSE: CVS

Entrust Inc. Nasdaq: ENTU

Express Scripts, Inc. Nasdaq: ESRX

Terra Industries Inc. NYSE: TRA

WellPoint, Inc. NYSE: WLP

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