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Mike Wilson, Agrium CEO (TODD KOROL)
Mike Wilson, Agrium CEO (TODD KOROL)

Agrium sees hope as CF sells Terra shares Add to ...

Is there a break in the Fertilizer Wars?

Agrium Inc. thinks so, after CF Industries Holdings Inc. , the company it has been chasing for the better part of this year, announced it had sold shares in Terra Industries Inc. - the company CF has been chasing for almost the same period of time.

CF said Tuesday it has fallen below 5 per cent ownership of Terra, and warned that it doesn't intend to extend the financing it has for that deal, which expires Dec. 31 of this year.

Does that mean CF is pulling back from Terra? Will CF now be open to Agrium, which it has so far spurned? Todd Coakwell, Agrium's manger of investor relations, thinks so.

"I'm questioning their commitment now to Terra, and if that's the case, does that mean that there's some reconsideration taking place on their board?" he said. "It could open up some doors for us now to maybe approach them."

Industry sources, however, said CF may simply be seeking to trim the cost of carrying financing, and CF itself said it sold shares to avoid having to publicize its discussions with Terra.

And while CF warned that it can't assure investors it will keep trying for Terra, chief executive officer Stephen Wilson reiterated in a release that "we continue to believe that an acquisition of Terra is in the best interests of the stockholders of both companies and intend to consider alternatives available to us to advance this transaction."

Chris Damas, an analyst who owns Terra shares, sees the CF move as primarily a strategic ploy, rather than any kind of pullback.

"CF and its advisers figure if they withdraw in a forceful and overt way, they might cause Terra's stock to fall," he said in an e-mail message. "That could put pressure on Terra executives and "set them up for an offer next year (if market conditions are favourable)."

But, he added, an increasingly negative outlook for the fertilizer industry could dampen the enthusiasm of companies to press for hostile takeovers.

"Natural gas is rising. The U.S. dollar has rallied. Potash prices are stalled. Phosphate also faces new supply in Saudi Arabia," he said. "Things are not that great in fertilizer land."

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