The Successful Investor Hotline – Friday, May 15, 2009

Article Excerpt

AGRIUM INC., $56.82, Toronto symbol AGU, has increased the value of its hostile takeover offer for U.S.-based fertilizer producer CF Industries Holdings (New York symbol CF). This is the second time Agrium has raised its bid. Agrium is now offering $40 per CF share in cash (all amounts except Agrium’s share price in U.S. dollars), plus one Agrium common share. This raises the offer’s cash component by $5. Overall, the new offer is worth $4.2 billion, or 3.2 times Agrium’s 2008 earnings of $1.3 billion, or $8.34 a share. Agrium has a long history of growing through acquisitions, which increases its risk. Still, CF has appeal, as it would triple Agrium’s phosphate and UAN (urea and ammonium nitrate) fertilizer-production capacity. Developing countries, such as China, Brazil and India, will need fertilizer to increase crop yields as their populations grow. Moreover, fertilizer prices are low, and Agrium’s management believes that expanding now will put the company in a good position to profit…