CF may follow HudBay's path; Huntsman relies on bank suit; Amylin board fight offers no sale chance

By Cristal Cody

Tupelo, Miss., March 30 - Agrium Inc. may be waiting for CF Industries Holdings, Inc. to follow the path taken by HudBay Minerals Inc., which lost board seats after the Canadian company tried to structure a takeover without shareholder support, an analyst told Prospect News.

Meanwhile, Huntsman Corp. is relying on a potential $3 billion windfall from a lawsuit against the banks involved in its failed merger with Hexion Specialty Chemicals to cover obligations, an analyst said Monday.

Also on Monday, the fight over board seats at San Diego-based Amylin Pharmaceuticals Inc. is not expected to result in a sale of the company or do much that would impact investors, an analyst said in an interview.

On Wall Street, the ouster of General Motors Corp.'s chief executive officer and the White House's declaration of a potential controlled bankruptcy of the Detroit automaker sent stocks down on Monday.

GM shares closed down 92 cents, or 25.41%, at $2.70.

The Dow Jones Industrial Average lost 254.16 points, or 3.27%, to close at 7,522.02 on Monday.

The broader indexes also saw declines. The Standard & Poor's 500 index fell 28.41 points, or 3.48%, to 787.53, and the Nasdaq Composite index dropped 43.40 points, or 2.81%, to 1,501.80.

CF investors in play

Deerfield, Ill.-based CF Industries said late Sunday that its board of directors has voted against Agrium's improved offer made on Friday to acquire the company.

The board said the offer was grossly inadequate.

The Calgary, Alta.-based agricultural products company offered $35.00 in cash and one share of Agrium for each CF share.

CF Industries, a major producer and distributor of nitrogen and phosphate fertilizer products, said its financial advisers have reported that Agrium could offer $100.00 per CF share.

Mike Wilson, Agrium's president and CEO, dismissed the chance of a $100-a-share bid on Friday in a conference call with analysts.

CF Industries is attempting its own hostile takeover of Sioux City, Iowa-based nitrogen provider Terra Industries Inc. for a sweetened all-stock deal valued at $30.50 per share. CF Industries had previously offered $27.50 a share in stock for the company.

"We are confident that both our stockholders and Terra's stockholders support our proposed business combination," Stephen R. Wilson, chairman, president and chief executive officer of CF Industries, said in a statement. "We believe the Terra stockholders will show their support by voting for our proposed slate of directors at Terra's annual meeting, which is required to be held by May 15th under the Terra by-laws."

CF probably will not make much more of a bid increase for Terra to avoid angering investors, an analyst told Prospect News.

Shareholders are already upset because management structured the hostile takeover attempt of Terra to avoid a shareholder vote.

"That's why when CF increased its bid for Terra, it wasn't by very much," the analyst said.

Agrium's strategy is similar to another situation that happened in Canada earlier this month, the analyst said.

"HudBay Minerals has provided a model for what Agrium would like to see happen at CF," the analyst said. "The company tried to acquire another one and shareholders didn't like it. Management tried to do an end-run around shareholders."

Toronto-based HudBay invoked shareholders' wrath after it tried to merge with Lundin Mining Corp. last year without giving shareholders a vote. HudBay's incumbent board lost support in a proxy battle and dissident shareholders won control.

Shares of CF Industries dropped $2.91, or 3.97%, to close at $70.39, while Terra's stock fell $1.86, or 6.38%, to $27.28.

Investors pushed Agrium's stock down $2.69, or 7.02%, to close at $35.65.

HudBay shares lost 48 cents, or 7.80%, to close Monday at $5.67.

Huntsman counts on lawsuit to pay bills

An analyst said Monday that Huntsman's short-term liquidity position depends on a major court judgment against Credit Suisse Group and Deutsche Bank AG over the failed merger with Hexion.

"Huntsman expects a windfall through litigations to meet its contractual obligations," the analyst said.

Columbus, Ohio-based Hexion had agreed to acquire the Salt Lake City-based chemical products company in July 2007 for $28.00 a share.

Hexion tried to back out, and the banks refused to fund the deal on a claim the combined companies would be insolvent.

Huntsman received a $1 billion out-of-court settlement from Hexion in December over the breakup.

The lawsuit against the banks was filed in the 9th Judicial District Court in Montgomery County, Texas, and is scheduled for court mediation on May 11. A trial is set for June 8 if the mediation fails.

Huntsman is seeking $3 billion in damages and other fees.

The company could become a potential takeover target again if the market turns, but under the current market environment, "we attach a low probability to a potential bid for Huntsman," the analyst said.

"Other chemical companies are also struggling, and Dow's acquisition of Rohm and Haas suggests that U.S. industry buyers are unlikely to emerge for Huntsman."

Huntsman shares lost 29 cents, or 8.33%, to close Monday at $3.19, well off the 52-week high of $23.95.

Amylin plays musical chairs

Amylin Pharmaceuticals named two new nominees to the board on Monday in an effort to head off a slate of nominees from activist investor Carl Icahn and institutional investor Eastbourne Capital Management, LLC.

Amylin said the company chose Paul N. Clark, former CEO of Icos Corp., and Paulo F. Costa, former CEO of Novartis U.S. Corp., as nominees based on stockholder input and a review.

The biopharmaceutical company also has nominated 10 of its current directors for re-election to the board.

San Rafael, Calif.-based investment advisory firm Eastbourne Capital Management said in a statement Monday that it supports a lawsuit filed last week against Amylin in Delaware's Court of Chancery.

The San Antonio Fire & Police Pension Fund, an Amylin shareholder, filed suit to invalidate a poison pill put in place to make a takeover attempt more difficult.

"We had hoped that the Amylin board would come to a similar conclusion and respond positively to our request that they take action to dispel the cloud cast by the company's 'poison puts' and that resorting to the courts would not be necessary," Rick Barry, Eastbourne's founder and portfolio manager, said in a statement.

Eastbourne, which owns about 12.5% of Amylin's outstanding stock, has said it plans to nominate five directors to Amylin's 12-member board, while Icahn Capital LP also said it intends to nominate five new directors.

Icahn holds 8.3% of Amylin's outstanding shares.

Analysts have told Prospect News that a buyer for Amylin is unlikely to emerge amid current market conditions.

Jason Zhang, an analyst with BMO Capital Markets Corp., said Monday the fight for board seats is unlikely to impact the stock.

"We don't see that happening in the marketplace," he said.

Amylin shares closed down 68 cents, or 5.67%, at $11.32 on Monday. The stock has traded from $5.50 to $35.00 over the past year.

Mentioned in this article:

Agrium Inc. NYSE: AGU

Amylin Pharmaceuticals, Inc. Nasdaq: AMLN

CF Industries Holdings, Inc. NYSE: CF

General Motors Corp. NYSE: GM

HudBay Minerals Inc. TSX: HBM

Huntsman Corp. NYSE: HUN

Terra Industries Inc. NYSE: TRA

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