CF Industries and Terra Square Off

Oct. 15, 2009
Terra tries to discourage shareholders from voting in CF-nominated board members amid CF's hostile bid

CF Industries Holdings Inc. asked Terra Industries Inc. stockholders on Oct. 14 to appoint three board nominees CF selected in its effort to gain approval for its takeover bid of the rival fertilizer manufacturer.

Earlier this month, Terra Industries rejected CF's most-recent offer of $4 billion to purchase the rest of the company. CF said on Sept. 28 that it had acquired approximately 7% of Terra through share purchases.

CF has asked Terra stockholders to elect John Lilly, David Wilson and Irving Yoskowitz to the board during Terra's annual meeting scheduled for Nov. 20.

Lilly is president of John Lilly Strategic Insights LLC and former CEO of The Pillsbury Co. Wilson serves as president and CEO of the Graduate Management Admission Council and former managing partner at Ernst & Young LLP. Yoskowitz serves as senior counsel at Dickstein Shapiro LLP and is the former executive vice president and general counsel of Constellation Energy Group Inc.

"We are looking forward to Terra's annual meeting on November 20 when Terra stockholders will have the opportunity to show support for CF Industries' proposal for a business combination with Terra," said Stephen Wilson, chairman, president and CEO of CF Industries in a statement released Oct. 14. Wilson noted that Terra first proposed a "business combination" with CF Industries in 2004 and that the two companies have had many discussions since that time, including a conversation in 2007 when Terra reaffirmed the merits of such a deal.

"Now is the time to advance this compelling business combination by electing our director nominees at Terra's annual meeting," Wilson said.

Terra initially rejected a $2.77 billion offer from CF in March shortly after CF became an acquisition target of competitor Agrium Inc. Canadian-based Agrium extended the deadline date for its offer valued at about $4.4 billion to Oct. 22.

Terra has said CF's bid runs contrary to the company's strategy, shifting Terra's focus to lower-margin agricultural urea and ammonia, which represent 70% of CF's nitrogen sales and only 16% of Terra's sales.

"We believe electing CF's nominees would serve only the interests of CF and not the interests of all Terra shareholders," wrote President and CEO Michael Bennett and board Chairman Henry Slack in an Oct. 13 letter to shareholders. "Your board and management team are committed to enhancing shareholder value by continuing to execute our strategic plan, which we believe will deliver significantly more value to shareholders than CF's proposal."

Bennett and Slack also noted in their letter that Agrium's pending offer for CF "creates significant uncertainty for Terra shareholders."

"Terra's board believes CF shareholders are unlikely to approve a transaction with Terra if given the alternative of the Agrium bid," Bennett and Slack wrote. "Terra's board also believes that CF's stock price has been inflated as a result of Agrium's pending premium offer for CF, meaning the actual value of CF's offer could be significantly lower than current trading prices would indicate."

CF Industries gained $1.54 to $90.51 at 4 p.m. on Oct. 14 in New York Stock Exchange composite trading. Terra's stock rose 42 cents to $35.50 late-day Wednesday. Both companies appear on this year's IW 50 Best Manufacturers' list.

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