Fertilizer Makers' Urge To Merge

CF INDUSTRIES' plan to acquire U.S. fertilizer industry rival Terra Industries has run into a snag. Last week, Agrium, a Canadian fertilizer company, announced that it wants to acquire CF.

The competing bids highlight an urge to merge in fertilizers, one of the only segments of the chemical industry that has been doing well lately. Whereas big chemical makers posted earnings declines or even losses in the fourth quarter of 2008, CF and Terra both reported big gains (C&EN, Feb. 23, page 35).

The fertilizer saga started in January, when CF disclosed an unsolicited offer to acquire Terra for $2.1 billion. It said the combination would create the world's largest producer of nitrogen-based fertilizers (C&EN, Jan. 26, page 8). Terra soon rejected the bid, calling it inadequate.

On Monday, Feb. 23, CF announced that it was formally launching the offer and taking steps to replace Terra directors at the company's upcoming annual meeting. Two days later, Agrium revealed its bid for CF. Agrium offered to pay $72.00 per share, or $3.6 billion, a 30% premium over CF's closing stock price on the previous day.

According to a letter that Agrium CEO Michael M. Wilson sent to CF shareholders, the offer is contingent on CF terminating its bid for Terra. CF later put out a press release saying it would evaluate the deal in light of its own plans, including its planned acquisition of Terra.

In a conference call hosted by Agrium after its announcement, a stock analyst asked Wilson whether he'd try to acquire the enlarged CF if the bid for Terra goes through. Wilson declined to contemplate that turn of events. "We are interested in CF, so it's hard to respond to a hypothetical case," he said.