New Round of M&A in Ag and Potash (AGU, CF, POT, MON, MOS)

Canadian agribusiness giant Agrium Inc. (NYSE:AGU) lost out on its bid for CF Industries Holdings, Inc. (NYSE:CF) earlier this year, and CF went on to acquire Terra Industries for $4.6 billion. That acquisition cost CF $113 million in second-quarter earnings, and contributed to a stock price decline that began in March and bottomed out in June.

Agrium saw its share price rise to a new 52-week high when it lost out on the CF deal, and its stock price is up about 48% for the past 12 months. Now Agrium is looking abroad at a different kind of acquisition, one that is more downstream. The company has offered to buy Australia’s AWB Ltd. for A$1.2 billion, leapfrogging a merger bid for AWB by Australia’s GrainCorp Ltd. that was worth about A$860 million.

Unlike rivals Potash Corp. (NYSE:POT), Monsanto Corp. (NYSE:MON), and Mosaic Co. (NYSE:MOS), Agrium is not expanding its fertilizer-making capacity with its offer for AWB, it is seeking a position in Australia’s retail agriculture business. AWB owns a chain of 400 outlets in its Landmark network, and Agrium wants to market its fertilizer and crop protection services through that network. AWB would be Agrium’s first entry into the Australian and New Zealand markets.

Agrium is offering AWB shareholders A$1.50/share in cash, compared with GrainCorp’s stock swap offer of 1 GrainCorp share for each 5.75 shares of AWB, about A$1.14/share at Monday’s closing price. The proposed AWB-GrainCorp merger remains active and AWB’s board has not changed its position recommending a vote in favor of the GrainCorp merger.

AWB is one of the largest Australian wheat exporters, and has commodities operations in Switzerland as well as Australia. The company posted a loss of A$251 million in 2009, and A$64.8 million in the first half of 2010. AWB lost its monopoly bulk wheat export business in 2008, and has struggled ever since.

Analysts expect other offers to compete with Agrium’s offer for AWB, particularly because the foreign bid for AWB needs government approval to go ahead. Another Canadian firm, Viterra Inc., acquired Australia’s ABB Grain Ltd last year for A$1.65 billion and could be interested in AWB as well, according to The Australian newspaper.

Agrium shares are down about -1% this morning, while Potash Corp., CF, Monsanto, and Mosaic are all up about 1%-2%.

Paul Ausick