CF increases bid for Terra; Celgene seeks Gloucester for up to $640 million; Apple goes LaLa

By Stephanie N. Rotondo

Portland, Ore., Dec. 7 - CF Industries Holdings Inc. upped the ante Monday, as it increased its offer for rival Terra Industries Inc.

The increased per-share price comes about 11 months after the beginning of a battle that started when CF made an unsolicited offer for Terra. Since then, Agrium Inc. has made a hostile bid for CF and the three companies have been going back and forth with bids, all jockeying for position as the world's leading provider of nitrogen fertilizer.

Still, some in the know don't see much value in the nitrogen mergers-and-acquisition space. But CF's recent offer is deemed more "credible" than its previous offers.

Meanwhile, Celgene Corp. said it wants to buy Gloucester Pharmaceuticals, Inc. for up to $640 million. An analyst said that while he understands the deal is strategic, he is also disappointed Celgene did not pick its only other option: Allos Therapeutics, Inc.

In the realm of technology, Apple Inc. is looking to add streaming music to its portfolio with its recently confirmed purchase of music service provider La La Media, Inc. The terms of the deal were not disclosed, but an analyst opined that the purchase price was "definitely immaterial."

The equity market ended mixed, with the Dow Jones Industrial Average gaining 1.21 points, or 0.01%, to end at 10,390.11.

The Nasdaq Composite index and the Standard & Poor's 500 index, meanwhile, were lower. The former dropped 4.74 points, or 0.22%, to 2,189.61, while the latter slipped 2.73 points, or 0.25%, to 1,103.25.

CF ups bid for Terra

CF announced it had increased its offer for Terra by over $4.00 per share.

In its latest offer, CF is bidding for Terra at $36.75 in cash and 0.1034 CF shares for each Terra share. That includes the $7.50-per-share dividend Terra declared in September.

All told, the deal is currently valued at $4.58 billion.

But even as the three-way battle in the nitrogen-fertilizer space persists, some market players are wondering if the fight needs to continue.

"I don't see a lot of value in nitrogen M&A," said Mark Connelly, an analyst with Sterne, Agee & Leach Inc. "It won't create a lot of value for shareholders."

Charles Neivert of Dahlman Rose & Co. agreed that shareholder value was "not exceptionally high."

"It would be moderately beneficial," he said of a CF-Terra merger. "But there is nothing just screaming 'let's go out and do these deals.'"

That said, both Connelly and Neivert think all three companies are in a good position.

"They are very profitable," Connelly said. "CF is a very good company. Terra is a very good company - maybe more separate than together."

Still, the recent offer for Terra "will probably bring them to the same table," Neivert said.

"I don't know if it completes the deal," he added.

Connelly also said he thought the increased offer will give Terra's board more reason to consider the merger, though "I won't be surprised if they turn it down anyway.

"We're getting though to a point where the bids are starting to be more reasonable."

And, with CF's new proposal on the table, it could result in Agrium raising its bid for CF.

"It's entirely possible that Agrium will raise their bid," Connelly said. With the nitrogen business "picking up, it's not hard to justify upping the bid. So I won't be surprised if Agrium will keep this going."

Neivert also said that Agrium will have to increase its offer "if they want to continue to play."

Neivert noted that Agrium said its last offer was its "best and final," though it is not held to that.

"These are very good companies and they have gotten into a difficult situation," Connelly remarked. "CF probably made a mistake in bidding for Terra. And Agrium took advantage of that. And now unwinding this has gotten pretty expensive."

CF's stock gained $1.01, or 1.14%, to close at $89.56, while Terra's equity improved $2.22, or 5.69%, to $41.27. Agrium's stock rose by 13 cents, or 0.22%, to $60.44.

CF is a Deerfield, Ill.-based company. Terra Industries is based in Sioux Falls, Iowa, and Agrium is based in Calgary, Alta.

Celgene wants Gloucester

Celgene, a Summit, N.J.-based pharmaceutical company, will acquire privately held Cambridge, Mass.-based Gloucester Pharmaceuticals for up to $640 million.

The company will pay $340 million up front and up to $300 million in so-called milestone payments.

In return, Celgene will "get an entrée into a very exciting area," Charles Duncan of JMP Securities told Prospect News.

Gloucester is currently testing Istodax for treatments for peripheral T-cell lymphoma. The trials are expected to clear certain regulatory hurdles by early next year. The drug has already secured approvals for the treatment of cutaneous T-cell lymphoma, a type of non-Hodgkin's lymphoma.

"We are thrilled with this transaction because Celgene's global leadership in the development and commercialization of innovative treatments for hematologic diseases makes them ideally suited to bring the clinical benefits of Istodax to patients with CTCL," Alan Colowick, M.D., chief executive officer of Gloucester, said in a press release announcing the news.

According to Duncan, if Celgene was looking to enter this space, they had two options: Gloucester or Allos Therapeutics, which also has a T-cell lymphoma treatment in Folotyn.

"They took the cheaper of the two," he said.

"From Celgene's perspective, I can understand the acquisition," Duncan added. Not only did he deem the deal "strategic," but he also noted that "I don't think they paid too much for it."

And while Gloucester's drug treatment has "some excited, the drug lines come with some commercial challenges," he said.

"But you can argue if anybody can handle and overcome those challenges, it would be Celgene," he said.

"They basically will get a clean slate to launch the product at the pricing they want," he said.

But Duncan also noted that Allos should not be discounted just yet.

"I'm a little disappointed Celgene didn't buy them, I would have hoped that would have happened."

While it is still on the table, Duncan said it was "more likely" for a Japanese hematology company to acquire Allos, though he also mentioned Novartis AG, as Allos' chief medical officer recently took a position there.

"I think Allos is still in play," he said.

Celgene's stock fell 44 cents, or 0.79%, to $55.53.

Apple snags LaLa.com

Apple recently added La La Media, which operates LaLa.com, into its fold, according to news reports.

The company confirmed the news on Friday but did not disclose terms.

La La will give Apple the ability to add streaming music to its repertoire. The company's current music application, iTunes, does not allow for streaming music.

Brian Marshall, an analyst with Broadpoint Amtech, called the purchase a "strategic technology buy."

"It gives Apple something they didn't have in terms of music streaming online," he said. He said La La's technology is "user friendly" and is "not wedded to any device," meaning users can listen to music relatively anywhere on any device.

When asked to speculate on the value of the deal, Marshall had no comment other than it is likely "definitely immaterial."

"[Apple] has the most net cash balances of all the technology companies," he said, placing it around $34 billion. By comparison, Microsoft Corp. has about $27 billion, while Cisco Systems, Inc. and Google Inc. each have around $25 billion.

Cupertino, Calif.-based Apple saw its equity dip $4.37, or 2.26%, to $188.95.

Mentioned in this article:

Agrium Inc. NYSE: AGU

Allos Therapeutics, Inc. Nasdaq: ALTH

Apple Inc. Nasdaq: AAPL

Celgene Corp. Nasdaq: CELG

CF Industries Holdings Inc. NYSE: CF

Terra Industries Inc. NYSE: TRA

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