Agrium’s Ill-Fated Bid to Acquire CF Industries Holdings

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CASE STUDY. The case is set in early 2010, a few weeks after Agrium, a large fertilizer manufacturer and distributor, put an end to its attempt to acquire CF Industries Holdings, another fertilizer company.

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Agrium’s Ill-Fated Bid to Acquire CF Industries Holdings: Abstract

Agrium’s Ill-Fated Bid to Acquire CF Industries Holdings is a case study by Alix Mandron.

The case is set in early 2010, a few weeks after Agrium, a large fertilizer manufacturer and distributor, put an end to its attempt to acquire CF Industries Holdings, another fertilizer company. The attempt itself was initiated early in 2009, and the last offer made by Agrium was dated November 2009. The leader of Agrium’s M&A task force wants to review the doomed offer in order to determine whether a mistake was made in terms of either the valuation or deal structure, or whether the target was just unreasonably demanding. Industry and company background is provided, together with a summary of the initial offer and subsequent revisions. An Excel file and maps accompany the case. In addition to comparative financial analysis and equity valuation, this case provides the opportunity to discuss and evaluate synergy effects, acquisition premia and forms of payment.

Teaching objectives

This case is above all an acquisition valuation case. It is structured so as to cover the following topics: acquisition motives and valuation of synergy effects, financial analysis and valuation of the stand-alone potential partners, determination of the transaction price/share exchange ratio and impact of legal, tax and other considerations on the deal’s structure. Its overriding concern is to make students realize that M&As are not (or should not be) “just a numbers game,” even when looked at from the point of view of a chief financial officer (CFO). Better said, M&As do involve figures, but the latter must be based on a thorough understanding of the industry and companies’ practical operational workings. Another important objective is to establish an explicit link between corporate strategy, offered price, control premium and acquisition-derived advantages. A secondary pedagogical objective is to hone students’ skills at financial analysis, in particular comparative financial analysis. Finally, it is possible to emphasize, and illustrate, that if an acquisition is indeed an investment project to be valued in the same way as all other projects (through NPV computation, for example), it is also more complex; legal, fiscal and financing considerations are usually more involved and must be taken into careful consideration when packaging an offer.

Additional information

Also available in French.

Teaching notes are available for professors. Contact the HEC Montréal Case Centre.

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