Following a year of rejected takeover bids for U.S. fertilizer firm CF Industries, Canada’s Agrium Inc. now aims to influence CF’s board from within.
The Calgary-based fertilizer and ag retail giant on Wednesday announced plans to nominate a merger-friendly slate of directors at CF’s next annual meeting of stockholders. Agrium also publicly urged Chicago-based CF’s board to spit out a “poison pill” that currently blocks a takeover bid.
“The time is overdue for you to remove these preclusive barriers and let your stockholders decide for themselves whether to accept Agrium’s offer,” Agrium CEO Michael Wilson said in a letter to CF’s board.
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“We continue to have confidence in the compelling nature of a combination of our two companies, and intend to continue our efforts to achieve that combination which would benefit the stockholders of both our companies. To advance that outcome, Agrium will be nominating a slate of directors to stand for election at your 2010 annual stockholder meeting.”
CF hasn’t yet scheduled that meeting. Its previous annual shareholders’ meeting for 2009 was held in April.
CF’s board is currently focused on its own hostile takeover bid for another U.S. fertilizer firm, Terra Industries, and has previously described Agrium’s overtures to CF as an attempt to interfere with CF’s bid for Terra.
“In statements to the general public, you have claimed ‘overwhelming support’ for your Terra bid even though holders of only 38 per cent of Terra’s outstanding shares (excluding CF) supported your nominees to Terra’s board,” Wilson wrote to CF’s board Wednesday.
“At the same time, you have stated publicly that you do ‘not believe that the tender results reflect stockholder support for the terms of Agrium’s offer.’ Your statement simply is not credible given that holders of 60 per cent of your stock (excluding Agrium) supported our unambiguous offer of US$45 and one Agrium common share per CF share.”
“Unreasonable”
Wilson said CF’s “continued reliance” on the Delaware corporation law that governs CF, and on a “poison pill,” to block a takeover by Agrium, is “unreasonable.”
A “poison pill,” also known as a “shareholder rights plan,” is a mechanism used by publicly traded companies to ward off unwanted takeover bids.
When a bidder buys up shares of a company beyond a specified limit, the targeted company automatically “swallows” the pill by issuing a flood of new shares at a substantially reduced price for all other shareholders, which can render a hostile bidder’s own shares near worthless.
“Agrium remains open to discussing with you how best to proceed with this transaction, including possible modifications to the structure of our offer,” Wilson wrote to CF. “By talking, we might each learn something that would help us proceed in a positive manner.”
Canadian assets at stake in the dueling hostile bids include CF’s nitrogen fertilizer plant at Medicine Hat, Alta., and Terra’s nitrogen plant at Courtright, Ont.
To meet Canadian competition regulators’ expected requirements in Canada to allow an Agrium/CF merger, Agrium also recently signed a deal to sell a 50 per cent stake in its Carseland, Alta. fertilizer plant to Terra, conditional on Agrium winning control of CF.
