CF likely to push for all of Terra; Sun buyout turns political; Europe to review MPS deal

By Cristal Cody

Tupelo, Miss., Nov. 20 - CF Industries Holdings, Inc. won its three seats on the board of Terra Industries Inc. after shareholders voted Friday for the dissident slate - a move that analysts expect will give CF more negotiating room in its hostile takeover attempt.

In other situations, the European Commission extended the antitrust review of Oracle Corp.'s $7.4 billion acquisition of Sun Microsystems, Inc. at Oracle's request to Jan. 27 from Jan. 19.

The deal really has become too "political," an analyst told Prospect News.

Also on Friday, the European Commission set a Dec. 23 deadline for its review of Adecco SA's $1.3 billion buyout of MPS Group, Inc. The review is not expected to stop the transaction, an analyst said in an interview.

Meanwhile, stocks ended the week on a three-day losing streak.

The Dow Jones Industrial Average slid 14.28 points, or 0.14%, to close Friday at 10,318.16.

The Standard & Poor's 500 index fell 3.52 points, or 0.32%, to 1,091.38, and the Nasdaq Composite index closed down 10.78 points or 0.50%, at 2,146.04.

CF pulls ahead

CF said Friday that based on a preliminary count, its three nominees were elected to Terra's board "by a substantial margin."

Stephen R. Wilson, chairman, president and chief executive officer of CF, said in the statement that now it's "time to move forward and put these two great companies together."

CF sought the board seats after its repeated efforts since January 2009 to acquire Terra were rejected. CF has offered $32.00 in cash and 0.1034 of a share for each Terra share.

Terra, which has a staggered eight-member board, said in a statement Friday that the company remains open to considering "bona fide" offers.

"During the weeks leading up to the annual meeting, Terra shareholders delivered a consistent message to Terra's board and management team that CF's latest proposal substantially undervalues Terra's robust near- and long-term prospects and that they do not support CF's proposal on its current terms," Terra said. "Nevertheless, Terra shareholders noted that current trends in the fertilizer market could provide potential consolidation opportunities for many market participants."

Terra expects to pay a $750 million special cash dividend to shareholders in December. The Sioux City, Iowa-based nitrogen producer reported 2008 revenues of $2.9 billion.

Charles Neivert, an analyst with Dahlman Rose & Co., told Prospect News in an interview on Thursday that dissident slates are historically difficult to place on a company's board.

"There's enough people apparently who think that Terra might be a pretty good deal if CF can manage it," he said.

Deerfield, Ill.-based CF produces and distributes nitrogen and phosphate fertilizer products from plants in the United States and Canada and mining operations in Florida and owns a 50% stake in Keytrade AG, a global fertilizer trading group based near Zurich.

The win may bolster CF's attempts to close a transaction with Terra quickly to avoid its own $5.1 billion hostile takeover attempt by Agrium Inc., which extended its tender offer of $45.00 in cash and one Agrium share per CF share until Dec. 18.

On Thursday, Calgary, Alta.-based Agrium, a leading agricultural products retailer and producer of fertilizers nutrients, said 62% of CF shares had been tendered into its offer. The deal cannot be completed without CF board support because of takeover mechanisms.

With the board win, CF is expected to "continue to push for negotiations" to acquire Terra, Mark Connelly, an analyst with Sterne, Agee & Leach, Inc., said in a research note released to Prospect News.

"Given CF's accretion analysis, we would expect Terra's new board to seek a significantly higher price, making the prospect for a negotiated deal far from certain," Connelly said. "We see little economic value in nitrogen consolidation, but view Agrium-CF as a more strategically logical combination than CF-Terra."

Terra shares climbed to a new annual high of $40.37 on Friday until the stock edged back and closed up $1.96, or 5.14%, at $40.06.

CF's stock fell 14 cents, or 0.17%, to $82.73.

Agrium shares rose 13 cents, or 0.23%, to end at $57.32.

Sun deal pushed back

Oracle reportedly requested extra review time to present its arguments to the European Commission, which has stated its preliminary objections to the deal over the combination of Sun's MySQL open-source database with Oracle's top database products.

European regulators are concerned that Oracle's acquisition of MySQL could hurt competition in the database market.

The U.S. Department of Justice approved the deal in August.

One analyst Prospect News spoke to said the firm was going to stay out of the fray. "It's all political," the analyst said of the review.

Santa Clara, Calif.-based software maker Oracle has offered $9.50 a share in cash for Sun, which lost $120 million in the quarter ended Sept. 27 reportedly over market loss to rivals over concerns with the deal's closing.

Redwood Shores, Calif.-based Sun purchased MySQL for $1 billion last year.

Peter Goldmacher, an analyst with Cowen and Co., told Prospect News that the commission's "antitrust concerns are silly. To say this gives Oracle a monopoly in the database market is laughable. They are not going to back down on this deal, because they think the E.U. is wrong."

Sun shares rose 1 cent, or 0.12%, to $8.61 on Friday.

Oracle's stock lost 5 cents, or 0.22%, to close at $22.34.

E.U. sets deadline for MPS

The European Commission on Friday said in its notification of the provisional deadline review that Adecco and MPS "overlap in the provision of temporary employment services and permanent employment services."

Adecco, a Zurich-based recruitment process outsourcing and managed solutions firm, is active in Europe, the Americas, the Middle East and Asia.

Jacksonville, Fla.-based staffing solutions provider MPS also is active in Europe through units Modis, Badenoch & Clark, Judd Farris and Beeline, which provides vendor management software and managed solution services, the commission said.

Some market observers have not ruled out an extended review of the deal by European regulators over the overlap.

U.S. regulators approved the transaction on Nov. 17.

A MPS spokesman said the company had no comment when contacted Friday.

An analyst Prospect News spoke to on Friday said the European review shouldn't be painful.

"It's still very feasible for that deal to close in the first quarter," the analyst said. "There's a wide range of time left. The stock hasn't really moved much, and the volumes have calmed down a lot in the last week."

The $13.80-a-share cash offer also must be approved by MPS shareholders.

The companies expect the deal to close in January or February.

MPS shares rose 5 cents, or 0.37%, to $13.65 on Friday.

Adecco's stock closed down 0.29% at 51.50 Swiss francs.

Mentioned in this article:

Adecco SA Swiss: ADEN

Agrium Inc. NYSE: AGU

CF Industries Holdings, Inc. NYSE: CF

MPS Group, Inc. NYSE: MPS

Oracle Corp. Nasdaq: ORCL

Sun Microsystems, Inc. Nasdaq: JAVA

Terra Industries Inc. NYSE: TRA

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