The proposal represents a premium of 35 percent over the exchange ratio on Jan. 15, 2009, just prior to when the initial offer was made, and a 38 percent premium to the average exchange ratio over the one-year period prior to that offer.
The CF Industries board of directors also is prepared to return at least $1 billion of cash to stockholders of the combined company following the closing of the transaction, which likely would be accomplished through open market purchases or a self-tender offer. In addition, immediately prior to the consummation of the combination,CF Industries would distribute an aggregate of five million contingent future shares to CF Industries stockholders. These contingent shares would be converted into CF Industries common stock should the stock trade at more than $115 per share over a specified period following the close.
“We continue to believe firmly that a business combination with Terra is the best way to create stockholder value and is in the best interests of both CF Industries and Terra stockholders,” says Stephen R. Wilson, chairman, president, and CEO of CF Industries. “We believe that the return of cash will be extremely attractive to both sets of stockholders. The issuance of contingent shares provides an opportunity for existing CF Industries stockholders to benefit from upside performance in our stock. Once the premerger waiting period for the Terra transaction expires this evening under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, we will be in a position to close promptly following signing of a merger agreement.”
CF Industries has had regular contact with Terra stockholders since making its initial proposal for a business combination in January. Based on these conversations, the company believes that the enhanced exchange ratio, the preservation of the all-stock transaction, and the addition of a cash component would be compelling to Terra stockholders.
CF Industries continues to expect the combination to generate $105 to $135 million in annual cost synergies by combining corporate functions and optimizing transportation and distribution systems, and through greater economies of scale in procurement and purchasing.
CF Industries also has extended the expiration date of its exchange offer for all of the outstanding shares of Terra common stock until 5 p.m. Eastern time on Friday, Aug. 21, 2009, unless further extended. The offer had been scheduled to expire two weeks earlier. As of the close of business on Aug.4, a total of 9,144,017 shares of Terra common stock had been tendered into the exchange offer.