For almost a year CF Industries of Deerfield tried to acquire Terra Industries, Inc. of Sioux City, Iowa, and in that time Terra’s share price rose from $25 to $35, or about 40%. Industry watchers and analysts reveled in the drama, which included rival Agrium of Canada making a serious bid to acquire CF at the same time, and it was hinted that merger activity in the fertilizer realm signaled a growing economic recovery. (Well, whatever floats your boat.)
Finally, in mid-January of this year, CF gave up its pursuit of Terra, refusing to drastically increase its initial offer of $2.9 billion. In part, CF couldn’t afford to overpay, and it had been occupied in its own efforts to rebuff an unwanted suitor. So what ended up happening? The Norwegians rode in and swept Terra of its feet, of course. Who knew that the country which had cornered the market on expensive international achievement prizes had such a scented interest in fertilizer?
Yara International ASA, more than 33%-owned by the Norwegian government, agreed today to pay $4.1 billion for Terra, subject to all the normal fundraising, shareholder and regulatory approvals. That leads us to this important question: How can “normal” companies compete with entities backed by governments (or that travel through space in massive, near-impervious cubes)? Spending by governments doesn’t follow the same rules as spending by public corporations or private citizens, and the chances of beating out a government-backed entity in a bidding war aren’t good. If fertilizer was somehow seen as important to Norway, then the sky was the limit. Yara couldn’t lose.
So what does this mean? Well, first off, it means that Yara probably overpaid in a big way for Terra, and eventually some enterprising young journalist in Scandinavia with political connections is going to figure it out and let everybody know. The CEO of Yara might even lose a peace prize over the scandal. But then it will all blow over and the Norwegian government will go back to spending money like a drunken Viking.
At least we’re competing with them now in the race for who can spend the most money the most foolishly. We’ve got TARP.
Congratulations to us all. This is truly an inspiring global moment.