Terra Industries Inc. said Sept. 24, after the markets closed, that it plans to return an aggregate of approximately $750 million in cash to shareholders through a special cash dividend of $7.50 per share, expected to be declared and paid in the fourth quarter of 2009. Terra also announced that Terra Capital Inc. is commencing a tender offer and consent solicitation to purchase any and all of the company’s 7.00% Senior Notes due 2017 for cash at a price equal to 104.5 percent of par, including a consent fee. In addition, Terra plans to raise up to $600 million of capital through a debt financing.
“Terra’s board is focused on delivering value to our shareholders, and the special dividend offers shareholders significant additional value for their investment in Terra,” said Terra President and CEO Michael Bennett. “The stabilization in financial markets allows us to recalibrate our balance sheet while positioning Terra to continue to take advantage of opportunities to acquire assets that complement our business strategies.”
The Terra move may very well change the dynamics in CF Industries Holdings Inc.’s hostile takeover attempt of Terra. CF had been assuming Terra would have some $1 billion in cash. Under Terra’s latest move, that would be reduced to $500 million. While CF has not extended its latest offer, it still is attempting to elect three members to Terra’s board at the Nov. 20 shareholder meeting.
“We remain committed to acquiring Terra and are reviewing this news and the way it could affect our offer,” a spokesman for CF Industries Holdings Inc. told Green Markets late Thursday.
“Terra is committed to return value to its shareholders and this special dividend and debt refinancing is one way to do that,” a Terra spokesman told Green Markets, when asked if these were mechanisms to also stave off a CF takeover attempt. Prior to the move there had been speculation that Terra might continue to take “poison pills” to deter CF. Earlier this year, Terra successfully moved its shareholder meeting from May until later in the year.
Ironically, under CF’s last offer for Terra (GM Aug. 10, p. 1), CF would have returned $1 billion in cash to shareholders of the combined company following the closing of the transaction. Terra has now opted to give its shareholders the money beforehand, instead of after an acquisition. CF said a CF/Terra combo would have an estimated $2.1 billion in cash.