M&A

22 November, 2009

UPDATE 2-Terra board rejects latest CF bid

* Terra rejects latest CF offer

* Says offer was at the same price of Nov.1 bid (Adds quote from Terra CEO, new details from source, background)

By Michael Erman

NEW YORK, Nov 22 (Reuters) - Fertilizer maker Terra Industries Inc (TRA.N) on Sunday rejected rival CF Industries Holdings Inc's (CF.N) latest proposal to buy it, saying the new offer was at the same price as CF's already-rejected proposal from Nov. 1.

Terra, whose shareholders elected a slate of three directors backed by CF Industries on Friday, said the CF bid had proposed a deal at the same price as before that also included a 30-day "go shop" provision subject to a break up fee and expense reimbursement.

"Nothing about the vote changed the value of CF's proposal," Terra Chief Executive Mike Bennett said in a statement. "We continue to believe that Terra's current strategy, which capitalizes on our attractive product mix, diversified customer base and geographic advantages, will deliver greater value than CF's proposal."

But a source close to CF said the company had sent the offer over as a possible framework for a deal. The source said CF was prepared to discuss the terms of its offer once it understands what the process is to reach a deal.

CF has offered to pay $24.50 in cash and 0.1034 shares of its stock for every Terra share. The offer also includes a $7.50 per share special cash dividend, which Terra shareholders will receive whether the deal is accepted or not.

Terra's board, which previously rejected CF's proposal as inadequate, again concluded the proposed merger agreement did not provide any basis for engagement with CF, it said.

The companies had discussed a breakup fee of around $1.50 a share, or roughly $150 million, the source said.

CF has been pursuing Terra since January and has been the target of its own hostile takeover bid from Canada's Agrium Inc (AGU.TO).

The nearly year-long, three-way takeover battle between Agrium, CF and Terra has put the spotlight on the three companies and the increasingly hot fertilizer sector.

The industry has been rife with both proposed and rumored mergers, as many believe the world's growing demand for food and biofuel will lead to sustained growth and soaring profits.

On Friday, Terra's shareholders voted in the CF slate with the dissident directors taking roughly 45 percent of the shares outstanding in the preliminary vote count and Terra's slate with around 35 percent, according to a source familiar with the matter. That includes around 7 percent of Terra's shares that CF owns.

The company's shares rose more than 5 percent to over $40 a share, reaching their highest point in more than a year after the vote.

Terra said on Sunday that it will seat the new directors when the election results are certified. But the company said it has also taken steps to increase the size of its board and will reseat the three directors that shareholders voted out.

That slate of directors include the company's chairman, Henry Slack. (For more M&A news and our DealZone blog, go to www.reuters.com/deals) (Additional reporting by Paritosh Bansal; Editing Bernard Orr) ((paritosh.bansal@thomsonreuters.com +1 646 223 6113; Reuters Messaging: paritosh.bansal.reuters.com@reuters.net))

Source: http://www.reuters.com