Fertilizer Face-off Fizzles

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Back in January, the first nitrogen bomb hit Wall Street: CF Industries' (NYSE: CF) all-share offer for rival Terra Industries (NYSE: TRA). Agrium (NYSE: AGU) soon cut in to this takeover tango with an offer for aspiring acquirer CF Industries. That offer is set to expire on Monday.

I expect the bid to fail.

It's not that Agrium hasn't done anything to sweeten the pot. The Albertan Ag player has plumped up the cash portion of its bid multiple times. CF Industries hasn't budged from its original offer of 0.4235 shares for every Terra share. CF Industries' bid has even less of a chance of succeeding in its present form. I just don't think Agrium has done enough to sway CF Industries shareholders.

The market rally of the past few months has given shareholders of beaten-down companies renewed confidence in the value of their holdings. CF Industries' stock has risen by nearly $20 per share. Now that it feels, to many people, like the worst of the bear market is over, why cash out at this point? At $40 plus one share of Agrium, the tender offer translates to less than a 10% premium for CF Industries shareholders.

If I had to guess, it would probably take closer to $100 per share to bag CF Industries and its choice nitrogen and phosphate assets. Agrium has said it will walk away if not enough shareholders tender their shares by Monday. I hope Agrium does.

Too often, we've seen hostile Canadian acquirers drawn into repeated rounds of bid-sweetening, with some arguably sour results for shareholders. Yamana Gold (NYSE: AUY) paid a pretty penny for a somewhat mixed bag of mining assets in its three-way takeover back in 2007. More recently, Precision Drilling Trust (NYSE: PDS) ponied up for Grey Wolf and subsequently ran smack into a wall of debt.

It's probably best for everyone that these fertilizer companies just go their separate ways. We'll soon see whether that's how this one plays out.