Terra Industries weighs $2.1B takeover bid

Shares of fertilizer maker Terra Industries soar on $2.1B buyout bid from rival CF Industries

SIOUX CITY, Iowa (AP) -- Fertilizer company Terra Industries Holdings Inc. said Friday it will consider an unsolicited $2.1 billion takeover bid by rival CF Industries Holdings Inc. Its shares soared 27 percent in morning trading.

CF Industries made the all-stock offer late Thursday. The deal for Terra, which had 2007 revenues of $2.4 billion, would create a major fertilizer producer.

Under the proposal, Terra shareholders would get 0.4235 of a CF Industries share for each Terra share held, a 34 percent premium based on the companies' 30-day volume weighted average prices.

CF Industries, based in Deerfield, Ill., said its proposal didn't depend on financing, though it said it may need to refinance Terra's debt.

According to CF Industries, the combination could generate more than $100 million in annualized cost savings. It said in an open letter it requests a response from Terra by the end of the month.

Citi Investment Research analyst Brian Yu said Friday in a client note the proposal is "a win-win transaction for shareholders of both companies due to the anticipated synergies, 100 percent stock deal that allows for continued participation by Terra shareholders, and welcomed consolidation in a globally fragmented market."

He said a cash deal "would not 'fly' because of CF's conservative management team and likely objection by Terra to 'cashing-out' at arguably trough valuations."

Credit Suisse Securities (USA) LLC is financially advising Terra, and Cravath, Swaine & Moore LLP is legally advising it.

Terra shares jumped $4.20, or 25.8 percent, to close at $20.49 Friday, while CF Industries stock gained $1.29, or 2.7 percent, to $48.52.