CF Industries Holdings, Inc. says it has acquired approximately 7 percent of Terra Industries Inc. in the open market during the past two weeks. CF Industries has purchased 6,985,048 shares at a cost of $247 million. CF Industries also announced that it has sent a merger agreement to Terra Industries detailing the terms of its proposed business combination. The proposed 0.465 exchange ratio represents a premium of more than 35 percent.
Under the merger agreement:
- The exchange ratio would be 0.465 of a share of CF Industries for each share of Terra Industries.
- The 0.465 exchange ratio would be adjusted upon declaration by Terra Industries of its announced $7.50 per share dividend, based on the average trading price of CF Industries’ shares during a period prior to the closing.
- Five million contingent future shares would be distributed to CF Industries stockholders, which would convert based on CF Industries stock trading above $125 a share, increased from $115 a share to reflect the overall increase in the market.
- Stockholder approvals from both Terra Industries and CF Industries would be required, unless Terra elects to not require CF Industries stockholder approval by structuring the transaction to include CF Industries preferred stock.
- There would not be any "break-up" fee.
- There would not be any condition relating to U.S. or Canadian antitrust regulatory approvals, since CF Industries has satisfied these regulatory conditions regarding the proposed business combination with Terra.
"Our proposal provides a very significant premium to Terra stockholders, which is above historical premiums for stock transactions," says Stephen R. Wilson, chairman, president, and CEO of CF Industries. "Terra stockholders will have significant ownership in the combined company and share in real and substantial synergies. Our acquisition of 7 perdent of Terra further demonstrates our commitment to the business combination. We are confident that Terra and CF Industries stockholders support this business combination and that both sets of stockholders recognize its strategic merits."
The proposed business combination is subject to approval by the Terra Board of Directors and other customary conditions in the merger agreement, as well as confirmatory due diligence.
In the meantime, Agrium Inc. continues its simultaneous bid to purchase CF Industries. Agrium has extended the expiration date of its offer to acquire CF Industries for $40 in cash plus one Agrium share per CF share until 12 a.m. Eastern time on Oct. 22.
According to Agrium President and CEO Mike Wilson, "Agrium remains fully committed to acquiring CF, and as we have previously stated, we strongly believe that combining Agrium and CF will create a terrific company and significant value for stockholders. Despite the fact that CF continues to ignore a clear mandate to conclude a transaction, we will continue to press CF to execute a mutually beneficial merger agreement. Our offer remains far superior to any alternative articulated by CF, including remaining independent or paying a premium for Terra."