DBRS Places Agrium Under Review – Developing Following $1.1 Billion Offer to Acquire AWB Limited

DBRS has today placed the BBB Senior Debt rating of Agrium Inc. (Agrium or the Company) Under Review with Developing Implications following the Company’s announcement on August 15, 2010, that it has made an unsolicited proposal to acquire the Australian farm service provider, AWB Limited (AWB), for approximately $1.1 billion. Although DBRS believes the transaction may complement Agrium’s existing retail business and would enhance its business presence in Australian and New Zealand markets, the presence of a competing proposal, the uncertainty with respect to the final form of the transaction and the lack of clarity of financing details have resulted in today’s rating action.

AWB announced on July 30, 2010, that it had entered into a merger implementation deed with GrainCorp Limited (GrainCorp) and has been in the process of advancing that proposal. AWB has today indicated that it has, with the assistance of its external advisers, determined it is permitted under its merger implementation deed with GrainCorp to engage in discussions or negotiations concerning the Agrium proposal and that AWB intends to do so.

The financing terms of Agrium’s proposed transaction are not currently available, but the transaction appears well within the Company’s capacity, with approximately $0.8 billion cash on hand and significant undrawn short-term credit facilities at June 30, 2010. In addition, Agrium’s proposal is subject to a number of conditions, including a due diligence review as well as a potential competing response from GrainCorp.

Accordingly, DBRS will maintain Agrium’s Senior Debt rating Under Review with Developing Implications until further details of any potential transaction can be fully reviewed.

The final terms of any potential transaction, including those of the related financing, in combination with the outlook for the fertilizer market, will determine whether a DBRS rating action is warranted.

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.