Agrium Puts Carseland Plant Into Takeover Play

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Aiming to clear the road for a hostile takeover of a U.S. fertilizer firm, Calgary’s Agrium plans to sell half of one of its nitrogen plants to the takeover target of its takeover target.

Agrium, which still has its unsolicited bid in play for Chicago-based CF Industries, said it expects to clear the road under Canadian competition law for a CF takeover by selling 50 per cent ownership of its Carseland, Alta. nitrogen facility to Terra Industries for US$250 million.

Iowa-based Terra is itself the target of an uninvited takeover bid by CF and has resisted its U.S. rival’s unrelated bid since January.

The Carseland deal is conditional on Agrium closing on its takeover of CF, which that company’s board has fought off since February. CF’s board has said Agrium’s bids undervalue the company and are an attempt to interfere in its bid for Terra.

The Carseland deal calls for Terra to pay Agrium about US$250 million in cash, or about 340,000 tonnes of urea and over 60,000 tonnes of net ammonia on an annual basis and certain U.S. assets.

The deal with Terra is also subject to Terra raising $600 million of debt capital and “other customary closing conditions,” Agrium said in a release.

“The purchase price for the 50 per cent of Carseland is at a similar forward multiple to that which Agrium is offering for CF,” Agrium noted.

The Carseland facility, about 50 km southeast of Calgary, makes about 535,000 tonnes of ammonia and 680,000 tonnes of urea per year, with most of the ammonia used to make urea.

Carseland’s urea output includes 190,000 tonnes of Agrium’s “controlled release” urea products, ESN and Duration, sold mainly in Western Canada and the U.S.

“These actions will enable us to keep moving forward with the acquisition of CF Industries,” Agrium CEO Mike Wilson said in the release. “We believe CF stockholders strongly support our offer, and we will continue to press CF to engage with Agrium.”

To that end, Agrium has yet again extended the deadline on its offer to buy CF, worth US$40 cash plus one Agrium share per CF share, until midnight ET on Nov. 13. Agrium’s bid for CF was previously set to expire Oct. 22.

The largest Canadian asset at stake in Agrium’s bid is CF’s nitrogen fertilizer plant at Medicine Hat, about 240 km southeast of Carseland. Terra’s main Canadian asset, meanwhile, is its N plant at Courtright, Ont., near Sarnia.

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