CF Industries Holdings Inc. said March 2 that it has offered to acquire Terra Industries Inc. for $37.15 in cash and 0.0953 of a share of CF common stock for each Terra share. The offer has a total value of $47.40 per share based on CF’s closing price on Monday, March 1, 2010.

CF had said on Jan. 14, 2010 (GM Jan. 18, p. 1) that it was abandoning its bid for Terra.

On Feb. 15, Yara International ASA’s bid for Terra was announced at $41.10 per share in cash. The Yara deal was valued at $4.1 billion, the CF deal at $4.7 billion.

“It is clear that CF Industries is the best acquirer for Terra given the compelling strategic benefits of the combination, including the substantial synergies only we can achieve together,” said Stephen Wilson, CF chairman, president and CEO. “We withdrew our prior offer because we believed that Terra was unwilling to agree to a sale. Now that Terra is for sale, we have made an offer that is superior to Yara’s substantially lower, highly conditional offer.”

In a letter to the Terra board, CF said that in early January it sought additional information from Terra so that CF could be in a position to increase its offer. CF said Terra responded at the time that it would not supply information because “Terra is not for sale.” CF said that following this response it withdrew its offer and had no further communication with Terra.

“We do not understand how Terra could have entered into an agreement with Yara without giving CF Industries an opportunity to bid on a level playing field,” said Wilson in the letter. “We also do not understand how Terra could have accepted an offer from Yara with a risk-adjusted present value that we believe was not higher than the offer CF Industries had made in December 2009. The value of any offer from Yara must be discounted for the lengthy period to closing, as well as the risk that numerous conditions beyond Terra’s control will not be satisfied, including regulatory, legislative and stockholder approvals.”

CF said it intends to commence an exchange offer for Terra shares that will be scheduled to expire on April 2, 2010. CF says its offer can be accepted quickly and the transaction concluded. CF said following the closing of the transaction, it will effect a public offering of common stock in an amount equal to approximately $1 billion. CF expects the transaction to be significantly accretive to earnings, both before and after such equity issuance.

CF’s offer is subject to Terra terminating its merger agreement with Yara and entering into a merger agreement with CF. CF says it has received $4.05 billion of financing commitments and that the offer is not subject to financing. Morgan Stanley Senior Funding Inc. has committed $2.8 billion, and The Bank of Tokyo-Mitsubishi UFJ Ltd. has committed $1.25 billion.

On March 2, Terra acknowledged the CF offer and said its board will evaluate it in a manner consistent with its duties under applicable Maryland law and the terms of the Yara agreement. Terra said it would have no further comment on the CF proposal until the board has completed this evaluation. Terra noted that the Yara agreement may be terminated under certain circumstances, including if Terra receives a superior proposal and provides advance notice to Yara, and Yara does not match the superior proposal within five business days. If the Yara agreement is terminated under such circumstances, Yara will be entitled to a $123 million break-up fee.

Fertilizer industry reaction to the CF-Terra news was all across the board last week. “Surprise, surprise, surprise,” said one source. Another said it was predictable.

Soon after the Yara offer, many fertilizer industry sources were predicting that CF would have to be more concerned with fending off Agrium Inc. than renewing its efforts for Terra. Last week, some suggested that CF’s new offer was simply a maneuver to slow down Agrium. Ironically, a CF executive spoke on this topic Feb. 25 at the Morgan Stanley Global Basic Materials Conference. “We have never talked about Terra as being a defensive move in the context to Agrium,” Anthony Nocchiero, CF senior vice president and CFO, told analysts at the meeting. “People sometimes forget that we launched on Terra before Agrium launched on us … So, I would have to tell you that the management team and the board never thinks about this in the context of shark repellant.”

Sources last week asked whether Terra could still continue to reject CF if CF’s offer is higher than that from Yara. They noted that under the Yara deal, Terra President and CEO Michael Bennett would head up Yara North America, which would be based in Sioux City. Bennett has been promised an executive position under CF, but Sioux City would not be the headquarters of a merged company. Likewise, sources said higher synergies for a CF-Terra deal, and more overlap between the two companies, would mean more job losses than with a Yara-Terra deal.

And should Terra say yes, what would Yara do? Yara Board Member Frank Anderson was quoted in the Norwegian newspaper Dagens Naeringsliv as stating he doubted Yara would top CF’s offer. In the same article, however, Yara Chairman of the Board Oivind Lund stated that at this time he could not comment on how Yara would react. Yara would have five days to come back with a higher bid.

Yara said last summer that while it was interested in Terra, it did not want to be in the middle of a bidding war. On the other hand, in the past Yara has been willing to pay a high price for what it regarded as premium assets, i.e., the acquisition of Saskferco when the nitrogen market was at its peak in 2008. A surprise to many, the U.S. nitrogen industry is now the beneficiary of what appears to be a long-term supply of relatively low-priced natural gas, and Yara has noted the value of buying nitrogen capacity rather than building it.

While Intrepid Potash Inc. fourth-quarter net income fell 70 percent from year-ago levels, potash sales volumes moved up 60 percent, thanks mainly to positive movement in November. Fourth-quarter net income was $6.7 million ($.09 per diluted share) on sales of $73.1 million, versus the year-ago $22.7 million ($.30 per share) and $79.5 million, respectively. Actual potash and langbeinite (Trio^TM) sales volumes moved up to 150,000 st and 25,000 st, respectively, versus the year-ago 94,000 st and 17,000 st.

“The fourth quarter was characterized by weather-driven demand for potash at market prices, indicating that the North American potash market may be returning to a more historical level of demand,” said Bob Jornayvaz, Intrepid CEO. “North American farmers faced an extremely wet October in the corn growing region, followed by much improved conditions during November, allowing them to apply potash in the fields at more historically normal levels. This resulted in our selling 65,700 tons of potash in November. Given the fall applications and the robust activity that we have seen thus far in 2010, potash application rates appear to be returning to more typical levels. Our inventories have begun to decline as a result.

“Although 2009 presented Intrepid with many challenges, we successfully managed through the difficult market environment by staying focused on margins and deploying capital investment dollars to projects designed to lower our per tons costs. Looking forward, we believe that 2010 sales volumes should be improved from the last twelve months, and we are beginning to ramp up our mines and plants to operate at more normal production rates. The continued strength of our balance sheet provides us the flexibility to make balanced business decisions in what remains a promising, but somewhat uncertain market.”

Intrepid said its current red granular inventory is fully committed through the end of March. It said it continues to move some volumes forward into the distribution system with certain large distributors to assure customers that Intrepid product will be in place and available to meet their requirements. The company added that it has also made sales into April.

Intrepid said it moved more potash in January-February 2010 than it did for the entire fourth quarter of 2009. While it didn’t give the precise 2010 number, the fourth quarter number was 150,000 st.

The company noted that farmers bought potash in November even before prices dropped as they did in late December/early January.

On March 1, Intrepid’s potash posting went from $360/st FOB to $390/st FOB, and its Trio price went from $181/st to $196/st.

Intrepid said it plans to bring its West mine back to more historic capacity utilization by mid-year. It said it is now running all Carlsbad operations on a 24-7 schedule.

Intrepid expensed $9.4 million in the fourth quarter due to abnormal production costs associated with weather-related disruptions at the Carlsbad East facility, and also due to operating at a lower rate at the West and Wendover locations (GM Jan. 25, p. 14).

Intrepid is spending $14 million in 2010 to build a compaction facility at its Moab, Utah, location. This will allow the company to compact 100 percent of the product there so that it can all go into the agricultural market. The non-compacted product goes into the oil and gas drilling markets. While overall rig count rates have been going up, Intrepid said it has not seen the increased rates in the Rocky Mountains.

Intrepid is also eyeing a $70-$160 million upgrade to make more of its Trio product granular, rather than standard. The company said that it sold out of granular product during 2009, but that standard, which is popular in the export market, was in less demand. The cost of the upgrade will depend on how fast and how far it opts to go in this regard. At the present time it expects the expenditure, which is still being weighed, to be toward the lower end of the range.

For the year ending Dec. 31, 2009, net income was off 55 percent, to $55.3 million ($.74 per share) on sales of $301.8 million, versus 2008’s $124.1 million ($1.65 per share) and $415.3 million, respectively. Potash sales volumes were off 39 percent, to 440,000 st from 724,000 st. Langbeinite sales were off 28 percent to 149,000 st, down from 207,000 st.