SIOUX CITY -- Terra Industries said this morning that CF Industries' latest hostile bid tops a friendly takeover offer from Yara International.
Terra has told Norway's Yara it will cancel the deal the two fertilizer makers negotiated unless Yara agrees to sweeten its all-cash bid of $4.1 billion.
In a statement, Terra said its board had unanimously concluded that CF's latest cash-and-stock-exchange offer, valued at $4.7 billion, is "superior" to Yara's all-cash $4.1 billion bid.
Yara, the world's largest fertilizer maker, has five business days to decide whether to match CF's offer. Yara said it would have no further comment until after its board meets to consider Terra's notification.
CF, based in suburban Chicago, dropped its year-long pursuit of Terra seven weeks ago, only to return to the offensive after Terra accepted Yara's buyout.
The latest CF offer is for $37.15 in cash and nearly one-tenth of a CF share for each Terra share, while Yara's offer of $41.10 per share.
Yara previously has said it did not want to get into a bidding war. If Yara walks away from the deal, analysts said Terra's board would be obligated to accept CF's offer. CF has sent Terra a signed merger agreement.
If the Terra deal is terminated, Yara would be entitled to a $123 million breakup fee.
With CF moving closer to forcing a combination, Terra's downtown Sioux City corporate offices are again in jeopardy.
Under the Yara deal, in comparison, Terra's downtown Sioux City corporate offices would become the headquarters for the Norwegian firm's North American operations. Terra CEO Mike Bennett would lead the new division, in which existing Terra personnel would be largely kept in place.
CF has said it believes it can achieve $75 million more in cost savings than the Norwegian company. Specifically, CF has cited savings from the elimination of duplicate administrative functions.
"We believe that Terra is worth more to CF Industries than to any other acquirer, given the strategic benefits of the transaction, including synergies, which only CF Industries can achieve," CF CEO Stephen R. Wilson said in a statement this morning.
In addition to a greater dollar value, CF contends its offer is superior to Yara's because it can be completed in 30 days without approval from its own shareholders. CF also said it already has lined up the needed regulatory approval. Yara's offer, in comparison, would require a two-thirds stockholder vote, approval from the Norweigan government, which is one of Yara's largest shareholders, and U.S. and European anti-trust approvals.
"Any offer from Yara must be heavily discounted for the substantial risks and length of time associated with closing," Wilson said.
