CF Industries Holdings Inc. said Feb. 3 that it is moving ahead with its plans to merge with Terra Industries Inc. CF gave notice to Terra, in accordance with Terra’s bylaws, that it will nominate independent directors to replace three members of Terra’s board of directors at Terra’s 2009 annual stockholders meeting. Terra said last week that it has not yet set the date for this meeting. The 2008 meeting was held in May.
CF also intends to commence an exchange offer for all of the outstanding shares of Terra common stock at a fixed exchange ratio of 0.4235 CF shares for each Terra share. CF expects to commence the exchange offer mid-month. CF shareholders would own 53 percent of the new entity, versus 47 percent for Terra. The deal is valued at $2.1 billion.
“We believe this is the best way to advance this transaction,” said Stephen Wilson, CF chairman, president, and CEO. “While we believe the Terra stockholders will support a combination by voting for our nominees, our preference continues to be to enter into a negotiated transaction. We are confident that our offer represents full and fair value, and continue to believe that a combination of the two companies would provide significant benefits to both CF Industries and Terra constituents. Our proposal has been received very positively by the market.”
CF nominees include John N. Lilly, former CEO of The Pillsbury Company; David A. Wilson, president and chief executive officer of the Graduate Management Admission Council and former managing partner at Ernst & Young LLP.; and Irving B. Yoskowitz, former executive vice president and general counsel of Constellation Energy Group Inc., and of Baltimore Gas & Electric Co.
Terra wasted no time in responding to CF’s plans. It said CF submitted a slate of nominees in an attempt to advance its unsolicited proposal to acquire Terra. Terra noted that as announced on Jan. 28, 2009 (GM Feb. 2, p. 1), Terra’s board, with the assistance of its financial and legal advisors and after a comprehensive review, unanimously concluded that CF’s proposal does not present a compelling case to create additional value for the shareholders of either company, and that it substantially undervalues Terra on an absolute basis and relative to CF. Since then, Terra said many of its major shareholders have expressed to Terra their disinterest in CF’s proposal and their support of Terra’s strategy. Terra said its board and management remain committed to enhancing shareholder value by continuing to execute the strategic plan that they believe will deliver significantly more value to shareholders than CF’s proposal.
Terra said its board is composed of eight highly-qualified directors, seven of whom are independent. At Terra’s 2009 annual meeting, three directors will be elected to serve a three-year term. Terms for three Terra board members – Martha Hesse, Henry Slack, and Dennis McGlone – expire in 2009.
Terra said it plans to file with the Securities and Exchange Commission and mail to its shareholders a proxy statement in connection with its 2009 annual meeting.
Terra said the exchange offer announced by CF has not yet commenced, and this communication is neither an offer to purchase nor the solicitation of an offer to sell any securities. At an appropriate time, and if the exchange offer is commenced, Terra intends to file a solicitation/recommendation statement with respect to the exchange offer with the SEC.