Friday, February 27, 2009

More deals to come in fertilizer space

Following up on "Fertilizer Deal Becomes Bizarre Love Triangle (AGU, CF, TRA)" we have the Financial Post's Trading Desk blog looking for more action:
Prices are heating up in the fertilizer industry and so are the deals. Recently, it was revealed that a hedge fund under George Soros has been taking big stakes in Potash Corporation, and Wednesday Agrium Inc. announced an unsolicited bid for competitor CF Industries Holdings. More offers are sure to come because valuations are good and the market for nitrogen is very tight.

Agrium, a leading global producer of crop nutrients made an unsolicited offer for CF Industries Holdings Inc. in a mix of cash and stock valued at $3.6-billion. The proposed deal triples Agrium's phosphate and UAN capacity according to Agrium CEO Mike Wilson, and the combined entity would make Agrium the biggest producer of nitrogen, a key component of fertilizer.

There are good reasons why action is picking up sharply in the fertilizer space after a brutal end to last year. Firstly, nitrogen producers are extremely profitable at these levels. Margins are "extremely lucrative" with natural gas prices below $4 says Prakash Hariharan, associate portfolio manager at Front Street Capital and co-manager of Ceres Global Ag Corp. The Agrium bid for CF Industries comes on the heels of an all stock deal by CF Industries for competitor Terra Industries, the only pure nitrogen player in the space....MORE