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InvestorGuide Stock Analysis

Agrium: A Tale of Two Fertilizing Mergers
Excerpt from the InvestorGuide.com Stock of the Day on 2/25/2009

In an unsolicited proposal, Calgary-based Agrium offered to buy CF Industries (CF: Charts, News, Offers) today. This comes amid news that CF Industries launched a hostile bid for Terra Industries (TRA: Charts, News, Offers) just last month. Agrium's move hardly comes off as a surprise to arbitragers; in a publicly disclosed letter, President and CEO Michael Wilson stated that they have been trying to take over CF since before the company went public in 2005. The current deal would give the target company $3.6 billion in cash and stock. It is also contingent on CF retracting its hostile bid for Terra. Considering that they have tried to take the company over before, why would they want try to again?

Aside from similar corporate strategies and operating in the same industry, it is because of the expected boost in revenues the deal would create. The combined entity is expected to generate $14 billion in revenue. Furthermore, they would become an even larger leader in the fertilizer industry. Agrium also believes that within three years time, they can realize $150 million in annual operating synergies. As a comparison, their revenue for the year ending in 2007 totaled $5.27 billion while gross profit was just a bit under $1.6 billion. The company's unaudited 2008 results showed revenues totaling 10.27 billion with a gross profit of 3.2 billion. This would be hard to maintain in 2009 considering the global economic crisis. Granted, Canada was one of the only two G7 nations to report growth, some economists expect this to be an unsustainable trend. More >

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Morningstar Analysis for Agrium

Agrium (AGU) Upgrades

Date
Analyst
Old Rating
New Rating
10/27/2009
TD Newcrest
Hold
Buy
05/06/2008
RBC Capital
Sector Perform
Outperform
12/19/2007
CIBC
Sector Perform
Outperform
08/19/2007
CIBC Wrld Mkts
Sector Perform
Sector Outperform
08/18/2007
CIBC Wrld Mkts
Sector Perform
Sector Outperform
08/17/2007
CIBC Wrld Mkts
Sector Perform
Sector Outperform

Agrium (AGU) Downgrades

Date
Analyst
Old Rating
New Rating
02/26/2009
UBS
Buy
Neutral
09/26/2007
CIBC Wrld Mkts
Sector Outperform
Sector Perform
12/14/2006
UBS
Neutral
Buy
10/09/2006
Credit Suisse
Neutral
Outperform
11/07/2005
CSFB
Neutral
N/A

Agrium (AGU) New Coverage

Date
Analyst
Rating
08/13/2009
Thomas Weisel
Underweight
08/12/2009
Broadpoint.AmTech
Buy $63 Target
07/09/2008
Canaccord Adams
Buy
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Competitor Analysis

Agrium
Potash Corporation of Saskatchewan
Mosaic Company (The)
CF Industries Holdings
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