Hostile takeover bid targets rival
Agrium Inc., the third-largest seller of farm fertilizer and agricultural products in the U.S., made an unsolicited $325 million offer for rival Royster- Clark Ltd.
Holders of Royster- Clark income deposit securities would receive $ 10 per unit, or a 27 per cent premium over Monday’s closing price of $ 7.85, Calgarybased Agrium said yesterday in a statement.
Units of Royster- Clark surged 27 per cent in Toronto Stock Exchange trading. Shares of Agrium fell 1.2 per cent. The bid for Royster-Clark, which has about $ 1 billion ( U. S.) in annual retail sales, “ is consistent with our strategy to grow our profitable retail business and allow us to expand our geographic base and product diversity,” Agrium chief executive Michael Wilson said in the statement.
Royster- Clark sold income deposit securities in Toronto in July at $10. The units have slumped as much as 28 per cent since then. The company sells fertilizer, seed and crop- protection products at its retail outlets and provides services to farmers, mainly in the Southeast and Midwest U. S.
Agrium’s bid was unsolicited and a surprise, Royster-Clark chief financial officer Paul Murphy said yesterday in a telephone interview from Norfolk, Va. The company’s operating headquarters is in New York.
“ It came out of the blue and we have no comment yet,” Murphy said. “ We haven’t even put our heads together. We are joining up with some of our advisers in a few hours to talk about what we need to do next, and I really have no idea at this moment what we’ll do.” The acquisition would almost double Agrium’s annual farm retail sales in the U. S. to about $2 billion, spokeswoman Christine Gillespie said. The U. S. market for farm fertilizers and agricultural products is about $27 billion, and Agrium wants to expand retail sales to reduce dependence on production of commodity farm products such as potash and nitrogen, Gillespie said. Only UAP Holding Corp. of Greeley, Colo., and privately held Growmark Inc. of Bloomington, Ill., sell more fertilizer and agricultural products in the U. S. than Agrium, according to CropLife magazine. Agrium last month acquired 10 retail farm centres in Illinois, Iowa and Indiana, Gillespie said. Agrium also paid Imperial Oil Ltd. $22 million last month for equipment used to distribute and store fertilizer at 190 independent fertilizer vendors in western Canada.
Including about $ 210 million in debt of Royster- Clark, the total acquisition cost would be about $535 million, Agrium said. The offer is open until Dec. 15.
Standard & Poor’s Ratings Services placed Agrium debt on CreditWatch with negative implications. Agrium’s BBB rating is the second- lowest investment grade.