DBRS Comments on CF Shareholders’ 62% Tender to Agrium Offer to Acquire CF Industries

DBRS notes that Agrium Inc. (Agrium or the Company) has today announced that CF Industries Holdings, Inc. (CF) shareholders have tendered approximately 30 million CF shares, or 62% of total outstanding shares, into Agrium’s latest offer to acquire CF, which was set to expire yesterday (see DBRS press release dated November 5, 2009). Agrium has accepted the strength of the tender as an endorsement of its offer by CF shareholders and has extended the approximately $5 billion cash and stock offer to acquire all of the outstanding shares of CF until 12:00 midnight, New York City time, on December 18, 2009. In response, CF has today rejected the notion that the tender results reflect shareholder support for the terms of Agrium’s offer. With CF in the midst of its own attempt to acquire Terra Industries Inc. (Terra) and Agrium’s offer conditioned upon CF not acquiring Terra, DBRS expects that additional complexities related to the transactions may well arise or that the transactions may not be successfully completed at all. Accordingly, DBRS has maintained Agrium’s ratings Under Review with Developing Implications.

It is notable that Terra’s annual meeting is scheduled for November 20, 2009, and that CF has called upon Terra shareholders to demonstrate their support for CF’s bid for Terra by electing a slate of three directors nominated by CF to Terra’s board. DBRS believes that if CF is successful in having its director nominees elected to the Terra board, the likelihood of success of Agrium’s bid for CF in its current form will be greatly diminished.

The Agrium offer for CF also remains conditional on a number of factors, including (1) the termination of the CF bid for Terra; (2) negotiation of a definitive merger agreement between Agrium and CF; (3) receipt of the necessary CF board and stockholder approvals; (4) receipt of necessary regulatory approvals; (5) the absence of any material adverse changes to CF or its business and the continued operation of CF in the ordinary course of business; and (6) the opportunity to conduct limited confirmatory due diligence.

The resolution of Agrium’s Under Review with Developing Implications status will depend on the final terms of any potential transaction, if any is completed, including the related financing and the sale of an interest in Agrium’s Carseland, Alberta, nitrogen facility (see DBRS press release dated October 19, 2009), in combination with the outlook for agricultural markets.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The applicable methodology is Rating Mining, which can be found on our website under Methodologies.

This is a Corporate (Industrials) rating.