Terra Industries Inc. said Sept. 8 that it has sent a letter to shareholders and has now set Nov. 20, 2009, as the date of the annual shareholders meeting. On Aug. 31 it had indicated Nov. 19 as the meeting date (GM Sept. 7, p. 1). Terra has yet to name a location for the shareholder meeting.
Terra says that any shareholder proposal to be included in the company’s proxy statement for the meeting must be received by the company by close of business Sept. 18.
In its letter, Terra went on to give an upbeat review of the company’s outlook, saying the future continues to look bright. “The weakness in nitrogen markets in the first half of 2009 has leveled off as the general economy has stabilized. Since the beginning of 2009, the North American unaffected fertilizer composite has risen 29.0 percent, and during that time the broader market has shown signs of recovery, with the S&P 500 index gaining 13.9 percent.”
Terra sees improving fundamentals for the remainder of the year. It expects a strong fall fill season and strengthening nitrogen prices to refill depleted inventories. It said natural gas prices remain low, and that the company expects them to remain that way into next year. As of Aug. 28, Terra said it has a strong cash position totaling in excess of $1 billion, or more than $10 per share, as well as a strong balance sheet with minimal debt.
Terra also went on to lambaste CF Industries Holdings Inc.’s last offer for the company, which CF has since withdrawn. CF still seeks to put three directors on the Terra board at the shareholder meeting.
Terra said CF’s proposal is opportunistic and substantially undervalues Terra, not fully reflecting the underlying fundamental value of Terra’s assets, operations, and strategic plan. It said that while Terra would contribute approximately 59 percent of the nitrogen results of the combined entity (based on full-year 2008 results), Terra shareholders would receive only 48.5 percent of the equity. It added that CF’s proposed contingent futures shares proposal could result in an actual exchange ratio of only 0.4224 CF shares per Terra share, or 46.1 percent of the combined company, which is 0.3 percent lower than CF’s original unsolicited bid in mid-January.
Terra also believes CF’s stock has been inflated as a result of Agrium Inc.’s offer for CF, with the actual value of CF’s offer significantly lower than what current trading prices would indicate.
Terra said CF’s projected synergies claims are aggressive, particularly given CF’s lack of experience in large acquisitions of any consequence, and the proposed combination is subject to substantial execution risk. It said the CF-Terra combo would expose Terra shareholders to risks associated with the phosphate fertilizer market without compelling scale in that nutrient.
And Terra still argues that CF shareholders are unlikely to approve a transaction with Terra if given the alternative of the Agrium bid. Indeed, last week sources pointed to a Reuters report that indicated large hedge funds have been loading up on CF stock in expectation of a possible Agrium-CF deal. These funds now reportedly own more than 11 percent of CF’s outstanding shares and are among its 20 largest investors.
In the meantime, Agrium Inc. spokesman Richard Downey told Green Markets that an F-10 Registration Statement filed on Sept. 10 with the Securities and Exchange Commission had nothing to do with Agrium’s plans to buy CF. “The filing is for a universal shelf that was originally filed 25 months ago. It was refiled today as a matter of course as it was about to expire. It has nothing at all to do with CF.”
Still, according to the filing, the proceeds would allow the company to raise $1 billion via the sale of shares, subscription receipts, or debt securities, which would be used to reduce outstanding indebtedness, to finance future growth opportunities, including acquisitions and investments, or to finance capital expenditures of for general corporate purposes. Agrium did update its filing to include information about the proposed CF acquisition. As reported last week, speculation has been that if the Agrium-CF deal does not happen, Agrium may turn its sights on another acquisition, such as Intrepid Potash Inc. (GM Sept. 7, p. 11).
Agrium’s current offer for CF expires Sept. 22 unless extended.