Terra Industries Inc. said March 24 that its board of directors has rejected CF Industries Holdings Inc.’s latest offer of $30.50 per share, made March 23. Earlier bids were $27.50 (GM March 16, p. 1) and $20.00 per share (GM Jan. 19, p. 1).
Terra said the unanimous decision concluded that the most recent proposal continues to run counter to Terra’s strategic objectives, substantially undervaluing Terra both absolutely and relative to CF, and would deliver less value to shareholders than would owning Terra on a standalone basis.
Terra has also called the CF offer opportunistic, much in the same way CF categorizes those from Agrium Inc.
Unlike Agrium, Terra does not put that much value on CF’s phosphate assets, saying one of Terra’s advantages is that it is a pure play nitrogen company. It argues that CF does not have the scale to be a leading participant in phosphate. “CF’s bid does not reflect Terra’s much greater relative contribution of nitrogen results to the combined entity, and is opportunistically timed to take advantage of Terra’s stock price being temporarily depressed relative to CF’s stock price as compared to historic average trading prices during early 2006 through early 2008.”
Terra also says CF’s projected synergies claims are aggressive, and that the combination is subject to substantial execution risk. Terra says that it has led four significant acquisition integration efforts and is fully aware of the difficulty in achieving synergies, while CF’s management does not have experience effecting business combinations like the one proposed.
CF argued last week that CF-Terra synergies are clear cut since the two share similar technologies and locations, such as Donaldsonville, and that CF railcars pass Terra locations and Terra railcars pass CF’s. It argued that a combined company would find efficiencies.
CF argues that the CF-Terra deal has been well received by the stock market, and that on the first day after the Jan. 16 announcement of the offer, Terra stock went up 25.8 percent and CF’s 2.7 percent. It believes Terra stock would be trading significantly below its current level absent CF’s offer and the expectation of a CF-Terra combination.