CALGARY - Now that a prolonged saga that entangled three major North American fertilizer producers appears to have finally been resolved, an analyst expects the sector to take a breather from big takeover deals.
After more than a year of dizzying twists and turns, Agrium Inc. (TSX:AGU) has decided to walk away from its hostile pursuit of U.S. nitrogen producer CF Industries Holdings Inc.
And CF (NYSE:CF) on Friday announced a US$4.7-billion merger deal with Iowa-based Terra Industries Inc. (NYSE:TRA), which had shrugged off CF's overtures since last January until a sweetened offer was put on the table this week.
"Back then, when the companies started this, it was definitely opportunistic in the sense that the share prices had cratered," said Broadpoint AmTech analyst Edlain Rodriguez.
"Now I think those values have been realized ... You might see little transactions here and there, but I don't think you're going to see anything big going forward. I think that's done with."
Calgary-based Agrium's chief executive officer expressed no lament for the CF deal not having panned out, saying there were plenty of opportunities to grow its existing potash and urea production. It also recently added 60 Canadian retail farm centres to its portfolio.
"Too many companies get caught up in deals and overpay. ... We're a very disciplined company," he said.
"We're not disappointed. We did the right thing for our shareholders."
Investors pushed Agrium's stock up $5.09 or 7.45 per cent to $73.42 Friday on the Toronto Stock Exchange, with almost 2.3 million shares traded.
Fertilizer producer Agrium Inc. (TSX:AGU) gained after it announced that its hostile takeover bid for U.S. company CF Industries Holdings Inc. will be allowed to expire. Agrium shares climbed $5.09 or $73.42.
Investors probably didn't want Agrium to add more nitrogen production to its portfolio through its acquisition of CF, since the two other major crop nutrients - phosphates and potash - tend to deliver better value, Rodriguez said.
"Beefing up the potash business, the retail business made more sense instead of getting deeper into nitrogen and clearly the market reaction today kind of bears that out," he said.
Potash Corp. of Saskatchewan (TSX:POT), the world's biggest potash producer, reinforced the view that demand for that crop-strengthening mineral is set for a rebound.
It said Thursday that it now expects to earn between $1.30 and $1.50 per share for first three months of the year, up from earlier guidance of 70 cents to $1 per share.
The guidance compared with a profit of $1.02 per share in the first three months of 2009.
"Strong farmer returns, a depleted distributor pipeline and the agronomic need to replace soil nutrients have kick-started a potash rebound from 2009 lows," said PotashCorp president and chief executive Bill Doyle.
"While we know that growth does not follow a straight upward line, we believe the increase in potash sales volumes this quarter represents the beginning of a return to long-term growth in demand."
CF, meanwhile, said its merger with Terra will create the second-largest nitrogen producer in the world.
"We are excited to begin working together to become a more competitive global fertilizer player with enhanced scale, a broader strategic platform and enhanced access to capital markets," said CF chief executive Stephen Wilson.
"Our customers will benefit from expanded availability and flexibility of nitrogen product sourcing as a result of the complementary distribution and manufacturing assets of the two companies," Wilson said.
CF had rebuffed all of Agrium's overtures since it made its initial offer in February of last year, saying it would prefer to pursue Terra.
Agrium made its US$5.5-billion offer contingent upon CF dropping its bid for Terra.
The so-called "fertilizer wars" appeared to be tilting in Agrium's favour a month ago, when Terra inked a friendly US$4.1-billion deal with Norway's Yara International.
But CF tabled a US$4.7-billion bid for Terra last week and the two companies announced Friday they had reached a deal and that Terra had terminated its agreement with Yara.
In New York, CF's shares dropped 3.4 per cent to US$97.20 and Terra's dropped 1.3 per cent to US$46.30.