Finally, a Realistic Fertilizer Bid

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I hope you'll forgive me for not commenting on every twist and turn in the seemingly endless three-way takeover tug-of-war among fertilizer players Agrium (NYSE: AGU), CF Industries (NYSE: CF), and Terra Industries (NYSE: TRA). About a month ago, Terra rejected CF's advances for the fifth time. Now that there's a sixth proposal on the table (what's the record here, anyway?), I suppose it's a fine time to get up to speed on these potential pairings.

By Halloween, CF had dug fairly deep into its bag of takeover tricks in its pursuit of Terra, which stretches all the way back to January. In addition to begrudgingly raising the exchange ratio of its offer, CF both launched a proxy contest (Terra's annual meeting convenes two weeks from Friday) and acquired 7% of its target's shares in the open market.

What CF had not done until yesterday was offer cash as a component of its bid. As they say, money talks and, uh, other stuff walks.

OK, so I'm paraphrasing. But now that CF is dangling a majority-cash bid (to be financed with help from its financial advisor Morgan Stanley (NYSE: MS)) in front of Terra shareholders, this thing finally has a chance of succeeding. Note that a shareholder vote is no longer required, which will certainly make this deal easier to close. Terra, still playing this one close to the vest, said last night that its board "will review and consider the revised proposal in due course."

What made this revised bid possible was the same factor that's allowed EnCana (NYSE: ECA) to spin off its integrated oil subsidiary Cenovus Energy and Denbury Resources (NYSE: DNR) to merge with Encore Acquisition (NYSE: EAC). It's all about the credit market thaw.

As for Agrium's advances on CF, it was silly of me to take the former at its word when it said it would walk away if its tender offer failed back in June. Agrium has just continued to push back the expiration of its offer of $40 plus one Agrium share per CF share. As of Friday, that represented a minuscule premium of 4%. Unless it takes a cue from CF and goes big with a bigger cash bid, Agrium will likely walk out of this takeover tango without a dance partner.