Nitrogen and phosphate fertilizer producer CF Industries Holdings, Inc. (CF), in a renewed bid to acquire Terra Industries, Inc. (TRA), again sweetened its offer on Sunday 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 a 80% cash component this time, with only about less than 20% in stock.
This is the seventh offer CF has made to Sioux City, Iowa-based Terra in a bid to acquire it. The latest offer, valuing Terra at about $40.61 per share, represents a 28% premium to Terra's closing price of $31.77 on Friday. It also represents a sweetened offer by about $200 million, or $2 a share from CF's sixth and most recent all stock offer made in September of 0.465 CF shares for each Terra share.
Taking into consideration that the Terra stock has surged recently on takeover speculation, the current offer represents a much greater premium. The offer also represents a highly attractive multiple of 7.1 times trailing 12-months EBITDA.
In a statement, chairman, president and chief executive officer of CF, Stephen Wilson said, "The strategic benefit of combining these two great companies is undeniable. The substantial cash in our offer makes the combination far more accretive for CF Industries stockholders, while providing certainty on value and closing for Terra stockholders. The transaction is clearly in the best interests of our respective stockholders."
All the earlier offers made by CF were all stock offers that required CF shareholder approval. The latest offer represents 80% in cash and about less that 20% in new shares issued. The deal would not require CF shareholder approval provided the new shares issued are less than 20%. However, the transaction would be subject to approval by the Terra Board of Directors, entering into a definitive agreement with customary conditions and confirmatory due diligence.
Deerfield, Illinois-based CF noted that Morgan Stanley has committed $2.5 billion to provide the funds required for the acquisition of Terra. CF added that the financing commitment would expire on November 30, Unless a merger agreement is entered into by then. The transaction is also not subject to a financing condition, and CF Industries has satisfied all antitrust regulatory conditions that are required to close the transaction.
Separately, Terra Industries confirmed receipt of the latest sweetened offer from CF and said that it would review the offer in due course, in consultation with its independent financial and legal advisors. Meanwhile, Terra has asked its shareholders that it need take no action at this time.
Credit Suisse Securities (USA) LLC is serving as Terra's financial adviser, and Cravath, Swaine & Moore LLP and Wachtell, Lipton Rosen & Katz are serving as legal counsel to Terra. MacKenzie Partners is serving as proxy solicitor for Terra.
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,Inc. (AGU, AGU.TO). 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, saying 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 by that company. The company is seeking to replace three members of Terra's board of directors.
CF closed Friday's regular trading session at $83.25, down $2.75 or 3.20% on a volume of 1.12 million shares, higher than the three-month average volume of 0.83 million shares. Meanwhile, TRA closed at $31.77, down $0.97 or 2.96% on a volume of 1.59 million shares, lower than the three-month average volume of 1.62 million shares.
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