News

The Great Fertilizer War of 2009 may finally, after almost nine months of stalemate, be nearing an end.

Shares in CF Industries Holdings Inc. tumbled yesterday after its would-be Canadian acquirer unveiled a bolstered bid it called its "best and final" offer.

Agrium Inc. added $5 (U.S.) to its previous offer of $40 in cash - plus one of its own shares - to acquire CF, an Illinois-based fertilizer maker it has pursued since February. The increase amounts to a 12.5-per-cent boost, and Agrium hinted at possible legal action if it is rejected.

But rather than rise on the new terms, CF shares fell, in what analysts read as a sign that investors are bolting from a deal they believe is not sweet enough to persuade CF's board of directors to accept. Agrium, however, believes it will succeed in attracting more support than its previous offer, which garnered tenders from 62 per cent of CF shareholders.

"We're still optimistic that if we get a majority of the shareholders voting for a deal with us, that the board and management will listen and will sign a deal," said Agrium CFO chief financial officer Bruce Waterman. "There's a lot of time yet before the tender expires, and we're determined to consummate this deal."

In a press release, CF said it will review the offer but "noted that Agrium's offer represents substantially lower multiples of [earnings] than CF Industries' offer for Terra Industries."

CF's board has avoided Agrium's entreaties. Because the company is incorporated in Delaware, its directors must approve a deal; because CF has a poison pill, Agrium cannot buy up a dominant position.

Agrium has, however, persisted in its pursuit in hopes that a deal will persuade enough CF shareholders to tender shares that the company's management will have little choice but to negotiate. The current offer, which marks Agrium's third increase, expires Nov. 18.

Agrium, however, said the sudden drop in CF shares yesterday - which was accompanied by a bump to Agrium stock, another indication that markets believe the offer will not succeed - should serve as a warning to shareholders who vote no. "The change in CF's share price really is just a small taste of what may come for them," said Richard Downey, Agrium's senior director of investor relations.

Agrium will also consider taking its case before the courts if it fails, Mr. Waterman said. "Litigation is always an option, and we wouldn't reject any options at this point."

Agrium Inc. (AGU-T)

Close: $53.27, up $2.04

CF Industries (CF-N)

Close: $79.90 (U.S.), down $6.49

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A COURTSHIP TIMELINE

Agrium has been pursuing CF since February. Here is a chronology of Report on Business and ReportonBusiness.com headlines:

Agrium bids for CF Industries (Feb. 25)

CF again tells Agrium sweeter bid not enough (March 31)

Agrium sweetens offer for CF Industries (May 11)

Agrium calls CF bid 'best and

final' offer (June 4)

Agrium extends offer for takeover target CF (June 24)

Agrium extends takeover bid for CF Industries (Aug. 18)

Agrium makes 'best and final' offer for CF (Nov. 5)

Report on Business Company Snapshot is available for:

AGRIUM INC.