Monday, September 28, 2009
The Deal Professor has been following what he aptly calls "The Forever War" more closely than I, but I thought the recent developments worth commenting on, if briefly.
Now, Terra doesn't have a shareholder rights agreement on file with the SEC, so an accumulation of 7% doesn't trigger a dilution as it might were the board of Terra to have adopted one. This, of course, raises the question why the board didn't adopt one? It can be done easily enough and certainly the board must have been aware that someone (guess who) was actively building a bloc. A pill would have permitted the board to to continue to stave off an unwanted CF Industries bid while conserving cash that it might use in its attempted acquisition of Agrium.
Instead, it announced a $750 million cash dividend to shareholders. The dividend will make the company less attractive to CF, but at the cost of sapping the strength that Terra might otherwise need to acquire Agrium. Oh, and given that CF is now a 7% shareholder, the potential hostile buyer gets a nice dividend of about $7.50 per share for its troubles.