Wednesday, Terra Industries Inc. (TRA) once again unanimously brushed aside CF Industries Holdings, Inc.'s (CF) latest proposal to acquire Terra for the equivalent of $24.50 in cash and 0.1034 of a share of CF common stock, indicating the proposal as inadequate, opportunistic and not in the best interests of Terra and its shareholders. CF Industries' latest proposal equals the net value of CF's announced offer of $32.00 that will be reduced by Terra's previously declared $7.50 per share special cash dividend
On November 1, CF Industries sweetened its offer to $32.00 in cash and 0.1034 of a share of CF common stock for each Terra share, valuing Terra at $40.61 per share or about $4.1 billion. The offer includes the $7.50 per share special dividend declared by Terra. In its offer, CF has included an 80% cash component this time, with only about less than 20% in stock.
The Sioux City, Iowa-based Terra said that CF's presentation justifies its inadequate proposal using a 2010 EBITDA estimate for Terra of $525 million, which is in fact significantly less than Terra's projection of about $694 million.
Further, the company said that using CF's own proposed multiple of 6.7x1 Terra's projected 2010 EBITDA would indicate an enterprise value of $4.65 billion. Applying CF's own adjustments, this would imply an equity value of $51.55 per share for Terra.
Alternatively, using CF's mean NTM EBITDA industry acquisition multiple of 7.6x2 would imply an enterprise value of about $5.27 billion for Terra, which equates to $57.74 per share, a price which would still be substantially accretive to CF.
Another reason for the rejection of CF's proposal was that it undervalues Terra's ability to continue to make strategic and opportunistic acquisitions that build shareholder value, such as Terra's pending acquisition of a 50% interest in Agrium Inc.'s (AGU, AGU.TO ) Carseland nitrogen manufacturing facility and its acquisition of Mississippi Chemical Corp.
The company noted that its track record of delivering value to its shareholders in the form of stock buybacks and dividends, which have amounted to over $1.0 billion over the last four years, including the $750 million to be paid to all Terra shareholders in December as a $7.50 per share special dividend.
The company said that after considering all these factors, the board rejected CF's latest proposal. However, the company said it is open to considering any bona fide opportunity to create meaningful value for Terra shareholders.
Commenting on the board's decision, Terr's president and chief executive officer, Michael Bennett said, "CF's latest proposal fails to appropriately value Terra's world class assets, strategic advantages and prospects. Terra is a preeminent pure play nitrogen company, and through the continued execution of our strategy is well positioned to take advantage of an upsurge in demand from our agricultural and industrial customer base as the economic recovery continues."
Credit Suisse Securities (USA) LLC is serving as Terra's financial advisor, and Cravath, Swaine & Moore LLP and Wachtell, Lipton, Rosen & Katz are serving as legal counsel to Terra. MacKenzie Partners, Inc. is serving as proxy solicitor for Terra.
Separately today, CF commenting on Terra's rejection said that it has made a full, fair and compelling offer, which provides Terra stockholders with certainty of value and closing. CF Industries is confident that Terra stockholders will show their support for its offer by voting for CF Industries' three highly qualified, independent nominees at Terra's annual meeting on November 20, 2009. In September, CF announced that it has acquired approximately 7% of Terra in the open market over a period of two weeks. CF Industries purchased about 6.99 million shares at a cost of $247 million.
A possible merger between CF and Terra has been in the news since January 2009, when CF came up with a bid to acquire all of the outstanding shares of Terra for an estimated value of US$2.1 billion. However, barely days after CF tabled its buyout bid, the company found itself in the crosshairs of bigger rival and fertilizer company Agrium. In February, Agrium offered to buy CF for about US$3.6 billion.
CF rebuffed Agrium's offer, terming it "grossly inadequate" and "an attempt to interfere with its own proposed business combination with Terra." Instead, the company sweetened its bid for Terra by nearly 38%. However, Terra snubbed CF's takeover bid for the second time, stating that even the revised offer substantially undervalued Terra both absolutely and relative to CF.
In mid-March, CF's board reaffirmed its intention to pursue a business combination with the Terra and sent a letter to Terra's board of directors. However, that offer too was rejected by Terra, marking the third time the company rejected CF's offer, and continued to reject the subsequent three offers also.
Meanwhile, CF has launched a fight to unseat Terra's board after its takeover attempts were repeatedly rejected. The company is seeking to replace three members of Terra's board of directors.
TRA is currently trading at $35.765, up $0.89 or 2.54%, while CF is trading at $86.54, up $1.11 or 1.30% on the NYSE.
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June 12, 2026 17:14 ET Major central bank action was the focus this week in economic news. The European Central Bank became the first major central bank to move in response to the rising inflationary pressures in the backdrop of the conflict in the Middle East. In North America, the U.S. inflation and trade data as well as Canada’s central bank decision gained attention. The Chinese trade data was the main news in Asia.