* 62 pct of CF shares tendered into Agrium bid
* Vote on Terra board scheduled for Friday
* CF shares down 4.2 pct; Agrium, Terra also trade lower (Recasts, adds CEO comment, stock action. All figures in U.S. dollars, unless noted)
By Michael Erman and Euan Rocha
NEW YORK/TORONTO, Nov 19 (Reuters) - More than 60 percent of CF Industries (CF.N) shares were tendered into Agrium Inc’s AGU.TO nearly $5 billion hostile offer for the fertilizer maker, but the majority was not compelling enough to convince investors that a deal is likely.
CF stock fell 3.9 percent on Thursday morning following the results of the tender offer, lagging its competitors in the fertilizer industry. The dip indicates that investors were cooling on the deal’s prospects, but Agrium’s chief executive hoped the tender could open talks between the two companies.
“We hope that they sit back and reflect on what’s been given to them, reflect on what their shareholders are saying and are prepared to engage,” Agrium CEO Mike Wilson said in an interview.
“We will reach out to them today on several fronts and ask them to sit down and have a rational, productive discussion on the merits of our offer.”
Agrium is offering $45.00 in cash plus one of its shares for each CF share in what the company has called its best and final offer. This implies a deal value of $101.90 per CF share, or $4.95 billion, based on Agrium’s closing stock price on Wednesday.
The tender is likely to be overshadowed at Terra Industries’ TRA.N annual meeting on Friday, where CF has nominated a slate of three directors. That vote is more likely to determine a winner in the 10-month merger battle between Agrium, CF and Terra.
“As we see it, CF shareowners have again failed to deliver a unified message,” said Sterne Agee analyst Mark Connelly. “Today’s result sends a clear message, and one that we think CF’s Board can pretty easily ignore given its view that the CF-TRA combination would be highly accretive.”
CF has been fending off Agrium’s overtures since February and is itself locked in a hostile campaign to acquire Terra.
A victory for CF’s slate at Terra’s annual meeting on Friday would give them the upper hand in the three-way merger battle, but would not ensure a deal with Terra. Terra has an eight-member board and only three seats are up for election this year.
If, on the other hand, Terra’s own nominees win, Agrium’s chances at grabbing CF would likely be substantially improved.
The almost year-long saga has led some investors to label the three-way battle the “Fertilizer Wars,” or the “Ultimate Fertilizer Championship.”
Shares of CF were down $3.61 or 4.2 percent at $82.68 on the New York Stock Exchange, while those of Agrium and Terra were down 1.3 percent and 0.6 percent, respectively.
The boards of CF and Terra have repeatedly argued that the offers tabled by their respective suitors are inadequate and undervalue their companies.
Agrium said it has now extended its offer for CF until Dec. 18. Agrium’s bid for CF is contingent on CF dropping its pursuit of Terra.
Although 62 percent of its shares were tendered, CF can continue to stymie a deal. The Deerfield, Illinois-based company has a poison pill and other defense mechanisms in place that would prevent Agrium from completing the transaction.
A similar percentage of CF shares was tendered in an earlier Agrium bid in June, but many viewed that vote not as a referendum on value, but on whether shareholders were interested in a deal with the company at all.
CF on its part has also sweetened its bid for Terra and is currently offering $24.50 in cash and 0.1034 CF share for every Terra share. Terra’s board has also declared a special dividend of $7.50 a share, which shareholders will receive on Dec. 11 regardless of whether Terra reaches a deal with CF.
The current value of CF’s bid is $33.42 without the dividend and $40.92 with the dividend. Terra shares closed Wednesday at $38.05.
Last week, top proxy advisory firm RiskMetrics Group recommended Terra shareholders elect a dissident slate of directors backed by CF.
RiskMetrics’ recommendations have played a strong role in deciding which deals win investor approval and, in some cases, have been influential in obtaining higher deal prices for shareholders.
However, the RiskMetrics report is in conflict with recommendations made by three other proxy advisers. Those firms — Proxy Governance, Glass Lewis & Co and Egan Jones — all backed the Terra slate.
Interestingly, RiskMetrics also recommended that CF shareholders should tender their shares into Agrium’s hostile bid for CF, saying the offer is “compelling enough to at least earn a seat at the negotiation table.” (Editing by Lisa Von Ahn, Dave Zimmerman and Matthew Lewis)