M & A Law Prof Blog

Editor: Brian JM Quinn
Boston College Law School

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Monday, September 28, 2009

CF - Terra - Agrium Saga Continues

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.

CF Holdings filed a Schedule 13D yesterday announcing that is has acquired 7.0% of the outstanding shares of Terra Industries.  From September 10-25, CF Holdings spent $340 million accumulating this block of stock by making a large series of $35,000 purchases on the open market, resulting in a perceptable increase in market interest in the company's stock.  Here's the Google Finance page, take a look at the volumes in the 1 month back chart to see what I mean).

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. 

-bjmq




Update: Sorry, I'm always getting the parties in this three-way confused.  Randy (see comments) is correct. Agrium is attempting to acquire CF Industries. So, for my benefit:  Agrium is trying to acquire CF Industries who is trying to acquire Terra.  
  

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Comments

Agrium is attempting to acquire CF. Terra is not attempting to acquire Agrium.

Posted by: randy | Sep 29, 2009 3:59:49 AM

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