CF Won’t Extend Financing For Terra Deal

A day after rival fertilizer maker Terra Industries again rebuffed its takeover bid, CF Industries said it will not seek to extend financing to complete an acquisition of the Sioux City-based company beyond the end of this year.

CF’s $2.5 billion financing arrangement with Morgan Stanley is set to expire on Dec. 31. The company said its ability to obtain financing for any Terra transaction after that date will depend on the credit markets and other factors.

In a statement late Tuesday afternoon, CF said it has not given up on combining the two companies, but warned investors there is "no assurance” that CF will take further action to acquire Terra after Dec. 31.

"We continue to believe that an acquisition of Terra is in the best interests of the stockholders of both companies and intend to consider alternatives available to us to advance this transaction," CF President, CEO and chairman Steve Wilson said in a statement.

CF, which launched its hostile bid for Terra in January, did not disclose what specific alternatives it might pursue.

On Tuesday, CF also disclosed it also has sold a "sufficient number” of Terra shares in open market transactions, bringing its interest in Terra from 7 percent to just below 5 percent. As a result, the company said it no will longer be required to file a Schedule 13D in regards to Terra with the U.S. Securities and Exchange Commission. The move means CF is now free to have private conversations with Terra without having to immediately publicly disclose such discussions.

In early, after-hour trading Tuesday, Terra shares were down more than 3 percent on some speculation that the likelihood of a CF-Terra deal could be fading, while CF shares were unchanged.

On Monday, Terra announced its board had turned down CF’s sweetened offer of $29.25 per share in cash, plus 0.1034 share of CF common stock, raising the value to nearly $4.6 billion. All 11 directors rejected the bid, including three CF-backed nominees elected at Terra’s annual meeting last month.

In a statement, Terra said the latest offer, while higher than seven previous bids, continues to "substantially" undervalue the Sioux City-based company.

The company said the offer did not fully reflect improving conditions in the fertilizer market. A broad recovery among its agricultural and industrial customers is expected to drive rising demand and improving margins for the company’s upgraded nitrogen-based products.

"This thing has been going on for almost a year," Louis Meyer, a New York-based analyst at Oscar Gruss & Son Inc., told Bloomberg News in an interview Monday. "Terra clearly wants to stay independent.”

As it has pursued Terra, CF has faced its own takeover threat from Alberta, Canada-based Agrium.

(Source: Sioux City Journal)

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