Hot air
In 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.
Airgas, which has a sales and distribution network that sells canisters of specialty gases to industrial and medical facilities, also seems to be using the classic defence against unsolicited bids — appealing to its shareholders with its history as a higher return, faster growing company.
Airgas stock price appreciated 80 percent over the last five years and 415 percent over the last 10 years, compared to just 40 percent and 145 percent for Air Products` shares over the same periods, it pointed out in a letter its board sent to Air Products after the last approach.
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.
Agrium said last night that it was still committed to its deal and notified CF that it would be nominating two candidates for that company’s board of directors at this year’s annual shareholder meeting.
That meeting has yet to be scheduled. But with the distraction of the CF’s bid for Terra out of the way, perhaps the Agrium and CF could find common ground before the one-year anniversary of Agrium’s bid comes on February 25?
Terra directors back on the board
Fertilizer 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.
CF Industries CEO Steve WIlson sent a letter to Terra shareholders earlier this month saying that Terra, a Maryland company, could reappoint the directors under the state’s laws.
“If the Terra board decided to take such action in the exercise of its fiduciary duties (without disenfranchising stockholders through increasing the size of the board beyond what would result from reappointing those directors), we would not be in a position to object,” Wilson wrote in the letter.
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.
But perhaps more importantly, the new bid would not require approval from CF shareholders as it is now mostly cash. Terra had said CF would not be able to get its all-stock offer approved by CF shareholders. Cutting them out of the process is always a good way to help move a deal along.
Agrium and CF: different definitions of engagement
In 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.’”
“My response was: ’62 percent of your shareholders feel differently.’ And he said, ‘As far as we are concerned, there is no need to meet. So this phone call is what we consider engagement.”
CF raised its hostile bid for competitor Terra Industries on Wednesday, but several of CF’s shareholders took issue with the Terra bid on a CF conference call.
(Reporting by Euan Rocha in Toronto)
NRG, Exelon on bridge to nowhere
‘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.
Next stop on this long road: NRG’s annual meeting on July 21. Exelon has nominated a slate of directors to stand for election; shareholders will vote.
The two companies are part of a long list of running hostiles, including Broadcom/Emulex, Agirum/CF/Terra, Xstrata/Anglo American, Validus/IPC and EMC/Data Domain. Some of those offers are “unsolicited” and not “hostile” yet. But let’s face it — a bid that is unsolicited and perceived to be undervalued might not be “hostile,” but it isn’t considered particularly friendly.
Expect more unfriendly approaches as depressed stock prices and lack of long-term visibility continue to create wide - and often unbridegable – gaps between buyers and sellers.
In my opinion hostile take overs run a much higher failure risk and should be avoided when possible. In many cases there will always remain a festering hostility between the different factions involved in the deal.
Blow for blow
Hostile 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.)
Sometimes the new point is, well, a rather fine point.
Consider this statement put out by Agrium, which is battling to take over rival CF.
Mike Wilson, Agrium’s CEO: “Following a successful stockholder referendum on Agrium’s offer and after we reached out to CF and its advisors, CF’s Chairman and CEO Steve Wilson told me that CF would not meet with Agrium. Contradicting recent public comments that CF is prepared to engage, he stated to me that ‘there is no reason to meet because nothing has changed.’ Steve Wilson said he called since stockholders wanted him to engage with Agrium. I do not consider returning my phone calls to say that CF refuses to meet to be engagement and I don’t think CF stockholders will either.”
This time, though, CF did not rush out its own statement to address the allegation by Agrium’s Wilson that CF’s Wilson was contradicting his recent public comments.
Agrium CEO makes a plea for kindness
“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.
“At $85, I can’t believe (CF CEO Steve WIlson is) not going to come to us and say let’s talk,” Agrium’s Wilson said. “I’d be amazed.”
You don’t call, you don’t write…
Fertilizer 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.
“The fact is that Agrium and its financial advisors have not contacted or attempted to contact CF Industries in well over a month,” CF Chief Executive Stephen Wilson wrote in the letter. “The CEO of Agrium called on March 6, 2009, to ask if we needed additional information and he has not called since then.”
CF’s annual meeting is set for next week.
That is the coolest hot air ballon picture ever!
Cool