Engineering News

CF Industries Raises Its Bid for Terra
December 7, 2009, 9:21 am

CF Industries Holdings said Monday that it was raising its hostile bid for Terra Industries by $4.75 a share, extending a nearly yearlong takeover battle that also involves Agrium.

Under the latest bid, Terra shareholders would now receive $36.75 cash and 0.1034 shares of CF common stock for each Terra share, making the bid worth $45.91 a share based on CF Industries’ closing price as of Friday, which includes a $7.50 dividend.

The offer was extended to Terra on Friday afternoon in a letter from Stephen R. Wilson, CF’s chief executive, leaving Terra’s management all weekend to deliberate. Unlike with CF’s other offers, Terra did not summarily reject the deal, saying Monday that it had received the bid and was reviewing it. Its shares are up on the news nearly 9 percent in premarket trading to about $42 a share.

“Our offer has a value of $38.41 per Terra share (net of the $7.50 dividend) based on our closing price today and represents a premium of over 50 percent to what we believe is Terra’s unaffected share price after payment of the dividend,” Mr. Wilson said in his note. “That premium is substantially above historical and recent transaction premiums.”

The high price CF is paying is weighing on CF’s stock, which was down nearly 5 percent this morning in premarket trading. CF said its bid represents a multiple of 10 times Terra’s estimated Ebitda — or earnings before interest, taxes, depreciation and amortization — for 2009.

CF made its first move on Terra in January, initially offering $2.1 billion for the smaller fertilizer maker, which is based in Iowa. The two have battled back and forth, while CF has been fighting off a hostile bid from Agrium of Canada.

CF Industries increased its takeover bid for Terra to about $4.05 billion, from $3.86 billion, and announced that it received $2.5 billion of financing from Morgan Stanley, the biggest leveraged loan commitment by a single bank so far this year. (Morgan Stanley is also advising CF, alongside Rothschild.)

Were CF to acquire Terra, the deal would probably save it from Agrium, which said that it would not go through with its hostile bid if the other transaction were completed.

CF was successful in electing a slate of three directors to Terra’s board last month, giving CF a strong voice concerning Terra’s affairs. The three board members went to work last week. CF waited until its directors were on the board to make its increased bid, a person familiar with the matter told DealBook.

Source: The New York Times

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