CF Industries' exchange offer for Terra Industries underway

By Lisa Kerner

Charlotte, N.C., Feb. 23 - CF Industries Holdings, Inc. is beginning its exchange offer for all of the outstanding shares of Terra Industries Inc. common stock at a fixed exchange ratio of 0.4235 CF Industries shares for each Terra Industries share.

A prospectus/offer to exchange has been filed by CF Industries on form S-4 with the Securities and Exchange Commission.

According to CF Industries, the offer is set to end on May 15, the last date that Terra's bylaws permit the company to hold its annual meeting.

Terra's board said it will review CF Industries' exchange offer and make a formal recommendation to Terra shareholders within 10 business days. The exchange offer is unchanged from CF Industries' initial proposal that Terra's board of directors rejected, Terra said.

The exchange offer is subject to entering into a negotiated merger agreement, CF Industries said. Under Maryland law, the transaction can't close without the approval of Terra's board.

CF Industries said it expects to have its three nominees - John N. Lilly, David A. Wilson and Irving B. Yoskowitz - elected to Terra's board at the annual meeting.

Lilly is the former chief executive officer of Pillsbury Co., Wilson is president and CEO of the Graduate Management Admission Council and former managing partner at Ernst & Young LLP, and Yoskowitz is the former executive vice president and general counsel of Constellation Energy Group Inc., and of Baltimore Gas & Electric Co.

Market likes offer

In a Feb. 23 letter to Terra's board, CF Industries said its offer for Terra has been "well received in the market."

"Terra's shares are up over 50% since the offer, which is over three times the percentage increase of the peer group. The market clearly has recognized that the combination is compelling," the letter said.

CF Industries said it views the proposed transaction as a merger in which Terra stockholders "are receiving stock and sharing in the future upside of the combined company, including over $100 million of annual operating synergies."

Terra board member Mike Bennett, as well as a number of other Terra board members, would be asked to join the board of the combined company, CF Industries said.

As previously reported, CF Industries filed notification with the Department of Justice and the Federal Trade Commission as required under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended, in connection with its proposed acquisition of Terra.

In January, Terra rejected CF Industries' unsolicited offer to acquire the company in an exchange transaction valued at $2.1 billion.

Terra said at the time it would continue to execute its strategic plan, which the company believes will deliver more value to stockholders than CF Industries' proposal.

Morgan Stanley and Rothschild are advising CF Industries, and Terra is being advised by Credit Suisse Securities (USA) LLC.

Deerfield, Ill.-based CF Industries Holdings is the holding company for CF Industries, Inc., a producer and distributor of nitrogen and phosphate fertilizer products.

Terra Industries makes nitrogen products and is based in Sioux City, Iowa.

Mentioned in this article:

CF Industries Holdings, Inc. NYSE: CF

Terra Industries Inc. NYSE: TRA

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