Thumbs Up for Agrium - Desjardins

Agrium Inc. (AGU) got the thumbs up this week from Desjardins Securities analyst John Redstone, who initiated coverage on the fertilizer company, with a BUY rating and C$75.80 price target.

"Agrium is well positioned to benefit from improving fertilizer markets through its current operations and from its acquisition of CF Industries," said Mr. Redstone in a note to clients.

On the macro front, he said fertilizer markets should recover in the short term because of curtailed production, low soil nutrient levels and rising foodstuff prices. Longer term, they will benefit from rising demand from developing countries, low inventories and a limited supply-side response.

Mr. Redstone said Agrium has several key advantages to help it benefit from improving fertilizer markets, including a long potash reserve life, in-house production of ammonia, and low sulphur and natural gas costs.

"Furthermore, Agrium continues to demonstrate its determination and ability to grow by acquisition," he wrote.

As part of his bullish valuation, the analyst has included Agrium's hostile and yet unresolved bid for CF Industries (CF).

Our valuation of AGU assumes this transaction is successful, and that AGU acquires all the outstanding shares of CF for US$40.00/share (US$2.008b total through debt financing) and issues an additional 49.2m shares (on top of its existing 158.1m fully diluted shares outstanding).

We have also assumed that AGU’s estimate of US$150m/year in operational synergies is realized.

As of late June, roughly 62% of the outstanding shares of CF had been tendered to the AGU offer, but CF remains unwilling to engage in dialogue with Agrium.

Comments

[joeevan:]

Terra to buy 50 pct stake in Agrium plant on condition that Agrium's CF takeover goes through

11:30 am EDT, Monday October 19, 2009

SIOUX CITY, Iowa (AP) -- Agrium Inc. on Monday said it will sell part of its Carseland nitrogen facility to fertilizer maker Terra Industries Inc. in an effort to deal with regulatory concerns related to its proposed hostile takeover of CF Industries Holdings Inc.

The sale is conditional on Agrium acquiring fertilizer company CF and Terra raising of $600 million of debt capital, the companies said.

Terra will pay $250 million in cash for certain U.S. assets and a 50 percent stake in the facility in Carseland, Alberta, which has an annual capacity of 590,000 short tons of gross ammonia and about 750,000 short tons of granular urea.

Agrium believes this agreement will address regulatory concerns under Canadian competition law related to its offer to acquire CF.

Terra said the purchase will provide greater exposure to cheaper natural gas, a more diverse geographic footprint in North America and ownership in a facility that produces upgraded ammonia-based products, which is part of the company's long-term strategy.

This deal is the latest move in a lengthy acquisition saga between Agrium, CF and Terra.

Since February, Agrium has pursued CF with sweetened offers and extended deadlines, but has only been dealt rejection. Agrium made its offer on the condition that CF drop its bid for Terra.

Deerfield, Ill.-based CF has resisted Agrium's takeover efforts, preferring instead to chase rival Terra Industries, which it has sought to acquire since January. Despite repeated rejections, in September, CF renewed its bid to buy Terra Industries, saying it had acquired 7 percent of Terra's shares and that it has offered to buy the rest of Terra in a deal worth nearly $4 billion. Terra continued to resist the marriage. In October, CF urged Terra shareholders to elect three of its own nominees for Terra's board, in an effort to boost chances for its all-stock takeover bid.

In Monday morning trading, shares of Agrium rose $3.33, or 6.2 percent, to $56.67. Earlier, shares hit a new 52-week high of $56.69. Terra shares fell $1, or 2.7 percent to $35.38. CF shares gained $3.31, or 3.6 percent, to $93.94. Earlier, the stock reached $94.09, a new high for the year.

Oct 19 02:35 PM

[joeevan:]

Terra to buy 50 pct stake in Agrium plant on condition that Agrium's CF takeover goes through

11:30 am EDT, Monday October 19, 2009

SIOUX CITY, Iowa (AP) -- Agrium Inc. on Monday said it will sell part of its Carseland nitrogen facility to fertilizer maker Terra Industries Inc. in an effort to deal with regulatory concerns related to its proposed hostile takeover of CF Industries Holdings Inc.
(end excerpt)

Oct 19 02:36 PM