Terra shareholders set to vote; Sun Life plans deals; Liberty Starz holds buyout potential

By Cristal Cody

Tupelo, Miss., Nov. 19 - Agrium Inc. secured 62% of shares of CF Industries Holdings, Inc. in its hostile tender offer, but CF Industries dismissed it and said Thursday that the offer valued at $5.1 billion, or $101.90 a share, is "far from compelling."

The move sets the stage for a CF Industries combination with Terra Industries Inc., which holds its shareholders meeting Friday to elect directors to three of out eight board seats, an analyst said in an interview.

In other situations, Sun Life Financial Inc. is considering deals to grow its U.S. insurance divisions, and transactions are expected to pick up in the sector, an analyst told Prospect News.

Also on Thursday, Liberty Media Corp. shareholders approved the splitoff of Liberty Entertainment, Inc. and the division's subsequent merger with DirecTV Group, Inc.

As part of the deal, Liberty created a new tracking stock for premium cable channel owner Liberty Starz, and the company has the potential for a takeover, an analyst said Thursday.

Meanwhile, stocks continued to drag on Thursday, and investors sent the Dow Jones Industrial Average down 93.87 points, or 0.90%, to close at 10,332.44.

The Standard & Poor's 500 index fell 14.90 points, or 1.34%, to 1,094.90, and the Nasdaq Composite index slipped 36.32 points, or 1.66%, to 2,156.82.

Terra shareholders get say

Agrium's tender offer for shares of CF Industries was set to expire at midnight ET on Wednesday. Agrium said that 30 million shares had been tendered into its offer of $45.00 in cash and one Agrium share per CF Industries share.

CF Industries said in a statement Thursday that it "does not believe that the tender results reflect stockholder support for the terms of Agrium's offer. In fact, CF Industries has heard from its stockholders that there is very little support for the terms of Agrium's offer. The tender result does not change the fact that Agrium's offer is far from compelling."

Deerfield, Ill.-based CF Industries produces and distributes nitrogen and phosphate fertilizer products from plants in the United States and Canada.

This is the second time this year Agrium has secured about 60% of CF Industries shares in a tender offer, which cannot be completed without the support of CF Industries' board because of takeover defense mechanisms.

"CF stockholders have sent a clear and unambiguous message to CF's board that they want this deal with Agrium," Agrium president and chief executive officer Mike Wilson said in a statement. "To achieve such a compelling majority of stockholder support for a second time regarding the combination of our two companies speaks for itself."

Calgary, Alta.-based Agrium, a major agricultural products retailer and producer of three nutrients, nitrogen, phosphate and potash, which are used in fertilizers, has extended the tender offer until Dec. 18.

"Today's result sends a clear message, and one that we think CF's board can pretty easily ignore," Mark Connelly, an analyst with Sterne, Agee & Leach, Inc., said Thursday in a research note released to Prospect News.

"As we see it, CF shareowners have again failed to deliver a unified message, but we don't think it would have mattered anyway," he said. "Agrium has now extended the tender, but it's all about the Terra shareowner's meeting now."

Terra shareholders vote Friday on CF Industries' three nominees to the board.

CF Industries pushed for the board seats after Terra, a Sioux City, Iowa-based nitrogen producer, rejected its six takeover offers made since January 2009, including the latest one of $32.00 in cash and 0.1034 of a share for each Terra share.

Charles Neivert, an analyst with Dahlman Rose & Co., told Prospect News on Thursday that a CF Industries/Terra combination has become "the likely deal," based on the discount that has closed between CF Industries' offer and Terra's share price.

"It's closing up to a rather small number," Neivert said. "The market tends to be indicating they think that the deal will happen."

Meanwhile, CF Industries' share price has fallen well below Agrium's bid, indicating investors "don't think it'll happen," he said.

But even if CF Industries loses or wins Friday, it doesn't mean the three-way battle is over yet.

"None of these people seem to be wanting to give up," Neivert said. "This is one attempt, and they may take an attempt at others if they don't get the board seats. I don't expect them to walk away on that alone. But if CF does not get its board seats, it makes Agrium's offer potential get a little better."

RiskMetrics Group has recommended Terra shareholders vote for CF Industries' nominees. RiskMetrics also recommended CF Industries shareholders tender their shares in Agrium's bid to open up negotiations.

Three other proxy advisory firms, Glass, Lewis & Co., Proxy Governance, Inc. and Egan-Jones Proxy Services, have recommended in favor of Terra's slate.

CF Industries shares dropped $3.42, or 3.96%, to close at $82.87.

Agrium's stock rose 29 cents, or 0.51%, to $57.19.

Terra shares closed up 5 cents, or 0.13%, at $38.10 on Thursday.

Insurance deals expected

Sun Life Financial said Thursday the Canadian company is considering deals to grow its U.S.-based insurance businesses, Sun Life Financial U.S. and MFS Investment Management.

Jon Boscia, president of Sun Life Financial, said in a statement after the company's investor day in New York on Thursday that the company would consider acquisitions.

Third-quarter sales for the U.S. operations of Toronto-based Sun Life, the fifth-largest insurer in North America, reached a high of $1.6 billion, up 23% from the third quarter in 2008.

"Sun Life's businesses have maintained momentum even during the worst of the recession," Boscia said in the statement. "Now that the economy is entering a recovery period, we are well positioned to capitalize on growth opportunities globally."

Mergers in the insurance sector are likely to pick up because of the current environment of "low rates with no sign of a market turn," Paul Howard, an analyst with Langen McAlenney, told Prospect News on Thursday.

"Managements are probably getting impatient, have excess capital and want to show their boards they are doing something," he said. "They will start posturing to get ready for the next hard market."

Sun Life shares slipped 5 cents, or 0.18%, to close Thursday at $27.13.

Liberty Starz could go private

Under Liberty Media's splitoff of Liberty Entertainment, the new company will hold stakes in El Segundo, Calif.-based DirecTV, three regional sports networks and the Game Show Network and FUN Technologies.

Englewood, Colo.-based Liberty Media is controlled by John Malone, who also is chairman of DirecTV.

As part of the transaction to split off Liberty Entertainment, the company created a new tracking stock for Liberty Starz, which includes the Starz and Encore premium channels.

Richard Greenfield, an analyst with Pali Capital Inc., initiated a neutral rating on Liberty Starz' stock on Thursday.

"Liberty Starz begins its life as a public company with $800 million-plus of net cash ($15/share) including a $200 million receivable (from Liberty Interactive due within 12 months) and we expect the company to generate at least $200 million a year of free cash flow in each of the next few years," Greenfield said in a research note.

While the company may use the cash to repurchase stock, other alternatives exist.

"Liberty Starz is capable of essentially going private over the next five years, at stock prices well above current levels," Greenfield said.

Liberty Media shares fell 30 cents, or 2.72%, to $10.74.

Liberty Entertainment shares closed up 12 cents, or 0.34%, at $35.91 on Thursday.

Liberty Starz shares lost $1.03, or 2.11%, to end trading at $47.84.

DirecTV shares gained 46 cents, or 1.48%, to close at $31.50.

Mentioned in this article:

Agrium Inc. NYSE: AGU

CF Industries Holdings, Inc. NYSE: CF

DirecTV Group, Inc. Nasdaq: DTV

Liberty Entertainment Group Nasdaq: LMDIA

Liberty Media Corp. Nasdaq: LINTA

Liberty Starz Nasdaq: LSTAV

Sun Life Financial Inc. NYSE: SLF

Terra Industries Inc. NYSE: TRA

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.