Nitrogen products maker Terra Industries Inc. (TRA), Wednesday said it now considers the latest bid put forward by CF Industries Holdings, Inc. (CF) better than the deal made in February with Norway-based Yara International ASA (YAR.OL,YARIY.PK). Yara now has five days to come up with a better offer. Meanwhile, CF Industries said Terra is worth more to it than any other company given the strategic benefits, including synergies.
Last week, CF Industries proposed to acquire all the outstanding common stock of Terra for $37.15 in cash and 0.0953 of a share of CF Industries' common stock for each Terra share. CF Industries' renewed proposal on Tuesday is a follow up to a year-long pursuit that was somewhat abandoned in January.
In February, Terra's board had unanimously approved a definitive merger agreement with Yara, the world's largest fertilizer maker, to be acquired for $41.10 per share in cash. The deal was worth $4.1 billion in total. Yara's offer was a 23.6% premium over Terra's closing price on February 12, 2010, the last trading day prior to announcement of the agreement. The transaction was expected to close by the end of the second quarter.
Terra turned tables on Yara earlier today when it served a notice announcing its intention to terminate the Yara Agreement, leaving Yara with its sole right to come up with an offer at least as favorable as that of CF Industries' within five business days.
The Yara Agreement contained provisions of termination under certain circumstances, including Terra receiving a superior proposal and provides advance notice to Yara, and Yara does not match the superior proposal within five business days. Such a termination entitles Yara to receive a break-up fee of $123 million.
In the mean time, CF Industries is rushing through the acquisition process, and revealed that it has delivered a signed merger agreement to Terra based on the latest bid it made on March 5, 2010, which is $37.15 in cash and 0.0953 of a share of CF Industries common stock for each Terra share.
CF Industries is also asserting that it is the best acquirer of Terra in terms of strategic benefits and ease of closure of the deal. Stephen Wilson, chairman and chief executive officer of CF Industries said on Wednesday, "We believe that Terra is worth more to CF Industries than to any other acquirer, given the strategic benefits of the transaction, including synergies, which only CF Industries can achieve. Any offer from Yara must be heavily discounted for the substantial risks and length of time associated with closing."
Earlier, while making the renewed offer, CF Industries had specified that any offer from Yara would take at least four months to close, compared to under 30 days for its new offer. CF Industries also noted that Yara's offer has significant risks to closing, such as a required two-thirds stockholder vote, required legislative action, and U.S. and European anti-trust approvals.
CF Industries itself is facing a takeover attempt by Canadian rival Agrium Inc (AGU.TO) for almost a year, with Agrium wooing CF with sweetened offers every now and then and CF repeating that the offers are undervalued. Agrium recently revealed that about 12.5 million, or 26%, of CF's outstanding common stock had been tendered to its offer and not yet withdrawn as of February 19, 2010.
TRA is gaining $0.77 or 1.68%, and is currently trading at $46.60 on a volume of 3.24 million shares on the New York Stock Exchange. In the past 52 weeks, the stock traded in a broad range of $23.60 and $46.70, with an average volume of 8.40 million shares.
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