Hot air

Hot air ballonsIn a sign of the times, Air Products and Chemicals has become the latest suitor that does not want to hear ‘no’ for an answer.

The company launched an unsolicited $5.1-billion cash bid to buy rival Airgas in a move to create the largest industrial gas company in North America. In the past four months, Air Products had made two written offers but they were rejected by the Airgas board.

Unsolicited approaches and hostile M&A tend to increase coming out of a recession. As the economy begins to stabilize, stronger players feeling more secure in their own future seize on the chance to buy rivals at still-depressed prices. In the past few months, such deals include Kraft’s bid for Cadbury and the battle involving Agrium, CF and Terra.

Air Products said it offered a 38 percent premium over Airgas’s closing price Thursday and an 18 percent over Airgas’s 52-week high. But the $60 per share offer is around the low $60s Airgas touched in June of 2008.

Fond memories of a company’s past glory and expectations about profitability are often reasons why boards are so reluctant to sell out in their new, more depressing realities, and why these unsolicited approaches tend to turn hostile.

Happy Anniversary Terra! Love, CF

Fertilizer maker CF Industries gave rival Terra Industries an early anniversary present last night.

The company pulled its hostile bid for Terra on Thursday — on the eve of the one-year anniversary of its original bid, which was launched on January 15, 2009.

The withdrawal marks an end to one side of the three-way hostile takeover battle that some have called the “Fertilizer Wars.” Now, Agrium‘s hostile bid for CF Industries, and CF’s defense against that bid, takes center stage.

Terra directors back on the board

tractorFertilizer maker Terra Industries rejected another bid from CF Industries Inc on Sunday. But tucked into that rejection was another piece of news that some might have missed — Terra has reappointed the three directors that shareholders voted down last week in favor of a slate of directors backed by CF. The Terra directors that lost out to the CF slate included Chairman Henry Slack.

“The board, by unanimous vote of the directors whose terms do not expire this year, has taken steps to expand to eleven members, to be effective at that time, so that Terra’s three highly-qualified and experienced independent directors, Martha O. Hesse, Dennis McGlone and Henry R. Slack, will continue to serve on the board,” Terra wrote near the bottom of its Sunday night statement. “The board believes that Terra’s shareholders will benefit the most by combining this experience with the new perspective of the three additions to the board.”

The move — although possibly dilutive to shareholder democracy – was not necessarily unexpected.

Terra sees green in CF’s bid

The three-way fertilizer fight between CF Industries, Terra and Agrium may be approaching its end game. Over the weekend, CF raised the cash portion of its hostile offer for smaller rival Terra. It said it was able to add more cash because of strength in stock and debt markets.

CF is itself fending off a hostile takeover bid from Agrium. Last month, possibly throwing a monkey wrench into CF’s bid for Terra, Agrium said it would sell part of a nitrogen fertilizer facility to Terra to overcome regulatory issues related to its hostile takeover bid for CF.

In its latest move, CF is offering $32 in cash — including a $7.50 special dividend that Terra plans to pay — and 0.1034 of a share of CF common stock for each Terra share. That would amount to $40.61 per share based on CF’s Friday closing price and represents a 28 percent premium to Terra’s Friday closing price, the company said in a statement. It is about 5 percent higher than CF’s previous stock bid of 0.465 CF shares for every Terra share.

Agrium and CF: different definitions of engagement

Agrium CEO Mike WilsonIn an interview with Reuters today, Agrium CEO Mike Wilson described a phone conversation he had with CF Industries CEO Steve Wilson after 62 percent of CF’s shareholders tendered their shares into Agrium’s hostile bid in June. CF declined to comment on Mike Wilson’s account, which follows:

“The only discussion was a brief phone call from Steve Wilson saying, ‘My shareholders have asked me to engage, so I am phoning you. What do you want Mike?’”

“I said, ‘I would like to meet with you, Steve, and talk about valuation.’ And he said, ‘I don’t want to meet with you, there is no reason to meet.’”

NRG, Exelon on bridge to nowhere

bridge2‘Tis the season for unbridgeable gaps.

NRG Energy rejected Exelon’s sweetened (and hostile) bid on Wednesday, saying the $6.9 billion offer was still too low.   

Exelon raised its all-stock offer for NRG by more than 12 percent last week, but investors have not been swayed by the increased price. NRG shares have lost more than 15 percent of their value since Exelon bumped up its bid.   

Exelon has said its increased bid of 0.545 of its shares for every NRG share is its best and final offer. 
Still, NRG called the revised Exelon bid a step in the right direction.  “If you would properly recognize the value created by NRG itself, you would be able to increase your current 0.545 offer by a substantial amount,” NRG wrote in its letter.   

Blow for blow

Hostile dealsHostile deals – and there are a few going on – have one unintended consequence: too many press releases.

Every side feels compelled to correct a rival’s spin as things heat up, which means almost every press statement has an equal and opposite reaction.

In Bermuda, a three-way battle between IPC, Validus and Max Capital flooded the wires for weeks with innumerable press releases, as each side tried to make a case for why their deal was better. (Shareholders voted down an IPC-Max deal, but the fight is not over yet.)

Agrium CEO makes a plea for kindness

Agrium CEO Mike Wilson“Be kind in your article. I read this morning I wasn’t going to get the deal across,” said Agrium CEO Mike Wilson, referring to an article in Canada’s Globe and Mail about his company’s hostile bid for rival fertilizer maker CF Industries. “What the hell is that?”

Speaking on the sidelines of a BMO Capital Management agriculture, protein & fertilizer conference,  Wilson said he was frustrated by CF’s unwillingness to discuss his company’s bid, but “frustration won’t make us go away.”

Agrium bumped its cash-and-stock bid for CF to around $85 a share on Monday, increasing its previous bid more than 6 percent.

You don’t call, you don’t write…

agriumFertilizer maker CF Industries released the latest in a series of letters to its shareholders on Wednesday in an attempt to defend against a hostile takeover attempt from Agrium.

CF, which is also working on its own hostile offer for rival Terra Industries, listed in the letter the reasons why its shareholders should support its slate of directors at CF’s annual meeting next week, instead of witholding their support as Agrium would like.

CF suggested that Agrium is not serious in its offer, but is instead trying to scuttle CF’s bid for Terra. One of their reasons could be called the “Jewish mother defense”: Agrium hasn’t called or written in ages.