The battle for fertilizer maker Terra Industries Inc. (TRA) took a conclusive turn with Norway's Yara International ASA (YAR.OL, YARIY.PK) deciding not to better an offer made earlier in the week by CF Industries Holdings, Inc. (CF)
Soon after the announcement, CF Industries and Terra said that they have entered into a definitive merger agreement to combine the two companies over a deal valued at around $4.7 billion.
As per the new CF bid, Terra will receive $37.15 per share in cash and 0.0953 of a share of CF common stock for each Terra share, in place of the $4.1 billion or $41.10 per share offer made earlier by Yara.
The decision from Yara came soon after it was intimated by Terra that it finds the new proposal from CF Industries more attractive than that made by Yara.
Yara originally had five business day's to improve upon its offer, or walk away with a $123 million break-up fee payable concurrent with the merger agreement termination. Its 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.
Accepting the CF offer, Henry Slack, chairman of the board of Terra said, "Terra's board of directors believes that this transaction offers our stockholders a very significant premium for their shares. Taken together with the $7.50 per share special dividend paid by Terra in December, our stockholders are receiving an excellent return on their investment in Terra."
Under terms of the deal, following completion of CF Industries' exchange offer, a subsidiary of CF Industries will merge into Terra and any Terra stockholders that did not tender their shares into CF Industries' exchange offer will receive in the merger the same consideration paid in the CF Industries exchange offer.
Upon completion of the merger, Terra will become an indirect wholly-owned subsidiary of CF Industries, and Terra common stock will cease to be traded on the NYSE.
It has now almost been an year since the battle for Terra began, which included like Yara, CF and Agrium Inc.
At one point, it looked like the stalemate was broken with CF quitting the arena, while it continued to be pursued by its Canadian rival Agrium Inc (AGU.TO). Agrium's offers were repeatedly rejected by the CF board. Agrium's offer for CF of over $5.4 billion was made on condition that CF end its hostile pursuit for Terra.
At that time, CF also indicated it had sold all the acquired share of Terra and that the money had more that offset what it was spent in pursuit of Terra.
While making the renewed offer, CF Industries believed 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 had significant risks to closing, such as a two-thirds stockholder vote requirement, legislative action, and U.S. and European anti-trust approvals.
The merger will now require the approval of Terra's stockholders unless CF Industries owns at least 90% of the outstanding shares of Terra common stock following completion of its exchange offer, and, if necessary, after CF Industries' exercise of the top-up option under the terms of the merger agreement.
The transaction is anticipated to create annual cost synergies of up to $135 million and is expected to be significantly accretive to CF Industries stockholders on both a GAAP and cash EPS basis.
On March 5, 2010, CF Industries filed with the U.S. Securities and Exchange Commission a prospectus/offer to exchange on Form S-4 and has now extending the expiration of the exchange offer to April 2, 2010.
Jørgen Ole Haslestad, President and CEO of Yara International ASA said, "US remains an attractive market for us and we will continue to search for opportunities to grow our business in the region. We remain the global leader in the fertilizer industry, and there will be more opportunities around the world to grow our business further."
CF is now trading at $95.30, down $5.31 or 5.28%, on a volume of 6.94 million shares. In the last 52-week period, the stock traded in a range of $64.84 to $110.00, with a three-month average volume of 1.54 million shares.
Yara's shares surged 6.61% on the Oslo Stock Exchange and are currently at NOK 255.00
YARIY.PK is currently trading at $43.49, up $2.60 or 6.36%.
TRA is currently trading at $46.14, down $0.76 or 1.62%, on a volume of 15.88 million shares. In the last 52-week period, the stock traded in a range of $23.60 to $46.95, with a three-month average volume of 16.05 million shares.
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