Dan Loeb Discloses Stake In Giant Fertilizer Producer CF Industries (CF), Sends Stock Climbing

 @AlexCKaufman on July 29 2013 4:42 PM
RTR31UE6
Daniel S. Loeb, founder of Third Point LLC, participates in a panel discussion during the Skybridge Alternatives (SALT) Conference in Las Vegas, Nevada May 9, 2012. SALT brings together public policy officials, capital allocators, and hedge fund managers to discuss financial markets. REUTERS/Steve Marcus

Hedge fund investor Dan Loeb may be exiting Yahoo Inc. (NASDAQ:YHOO), but he has set his sights on the fertilizer industry.

Third Point LLC, Loeb's hedge fund, bought a large stake in nitrogen fertilizer manufacturer CF Industries Holdings Inc. (NYSE:CF), the biggest U.S. producer of nitrogen fertilizer, during the second quarter, Reuters reported Monday.

Third Point did not specify how many shares of CF Industries it bought but said CF Industries needs to return cash to its owners.

“CF currently trades at an unwarranted discount to fertilizer and commodity chemical peers,” Loeb wrote in a letter dated July 29. “We believe its structural cash flow generation strength is misunderstood and that management should deliver a much larger dividend to its shareholders.”

The activist investor completely reshaped Yahoo and he lobbied against – and ultimately deposed – the company’s former CEO, Scott Thompson, leading to the much-heralded hire of CEO Marissa Mayer, a former Google Inc. (Nasdaq:GOOG) executive.

In May, Loeb began pushing Sony to split its entertainment and electronic businesses to increase the company profit and return to shareholders. The board is currently weighing his offer.

Now, he’s hoping that CF’s “access to North American natural gas – the primary input in nitrogen fertilizer – gives the company a structural, sustainable margin capture relative to global peers with higher input costs,” according to Third Point's second-quarter letter to investors. 

Last week, the Deerfield, Ill.-based company declared a $0.40 per share dividend on its common stock, payable on Aug. 29.

Shares in CF surged 11.77 percent on Monday to close at $202.30.

Join the Discussion