Fertilizer Wars! CF Pressures Terra - TheStreet

Fertilizer Wars! CF Pressures Terra

In the ongoing fertilizer deal drama, CF Industries says it won't extend the deadline for the financing commitments of its proposed buyout of Terra.
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DEERFIELD, Ill. (TheStreet) -- CF Industries (CF) - Get Report won't extend the financing commitments for its proposed acquisition of Terra Industries (TRA) , putting pressure on its target, which recently spurned a buyout offer for the seventh time since the protracted courtship began in January.

CF, facing its own aggressor in Canada's

Agrium

(AGU)

, had received commitments for $2.5 billion in acquisition financing from

Morgan Stanley

(MS) - Get Report

, which also serves as one of CF's consiglieres in the hostile takeover battle. Failing a deal between the two fertilizer producers, Morgan's funding promise will expire on Dec. 31.

CF stopped short of capitulating, of course, saying that any future financing for a deal would be at the mercy of the credit markets. "There can be no assurance that CF ... will take further action to acquire

Terra or that the financing necessary to fund such a transaction will be available after" the end of the year, CF said in a regulatory filing Tuesday.

On Monday,

Terra rejected CF's

latest sweetened offer

(comprised mostly of cash and some CF stock), which values Sioux City, Iowa's Terra at around $4.6 billion based on the closing price of CF shares Tuesday.

This time, it was a particularly stinging rejection for CF. The Deerfield, Ill., company

won a proxy battle

at Terra's annual meeting in November, successfully foisting three of its own candidates onto Terra's board.

But those very CF-backed directors voted to dismiss the latest CF bid. As Terra said in its press release Monday, the board's decision was unanimous.

CF may be running out of options. It has indicated that it has emptied its pockets to sweeten its offer for Terra, though some observers may doubt the veracity of this claim. Whatever the case, a successful acquisition of Terra is probably CF's best defense against the

hostile advances of Agrium

, which has said it will nominate two dissident candidates for election to CF's board next year.

CF's efforts have been a case of bidding into a rising market, with cyclical agricultural stocks surging across the board in recent weeks. Year-to-date, Terra shares have doubled in price -- excluding a special dividend of $7.50 a share, distributed by Terra last week, which many observers have viewed as an anti-takeover defense maneuver.

Terra has argued that CF's bid undervalues its growth prospects in the face of a recovery and a brightening in the outlook for fertilizer demand next year. Indeed, some participants and investors believe that the price CF is offering -- about $45.88 a share, which includes $7.50 to account for the special dividend -- has effectively put a cap on Terra's stock price, which closed Tuesday at $33.33.

Still, others have counter-argued that the three-way fertilizer war itself has pushed the shares of these companies artificially higher.

CF's chief executive said in a press release after the closing bell Tuesday that his team continues to believe that "an acquisition of Terra is in the best interests of the stockholders of both companies."

CF also announced that it had trimmed its stake in Terra from 7% to 4.98%, below the threshold that requires investors to file regulatory reports with the

Securities and Exchange Commission

. CF acquired its Terra shares in September for about $247 million, or $35.29 a share on average. It sold shares over the last 60 days on the open market for prices as low as $33.12 and as high as $34.78.

In morning trading Wednesday, Terra shares were changing hands at $32.75, down 58 cents, or 1.7%.

CF shares, meanwhile, were gaining ground, up nearly 5% to $92.60. Agrium was rising by 0.7% to $62.60.

-- Written by Scott Eden in New York

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Scott Eden has covered business -- both large and small -- for more than a decade. Prior to joining TheStreet.com, he worked as a features reporter for Dealmaker and Trader Monthly magazines. Before that, he wrote for the Chicago Reader, that city's weekly paper. Early in his career, he was a staff reporter at the Dow Jones News Service. His reporting has appeared in The Wall Street Journal, Men's Journal, the St. Petersburg (Fla.) Times, and the Believer magazine, among other publications. He's also the author of Touchdown Jesus (Simon & Schuster, 2005), a nonfiction book about Notre Dame football fans and the business and politics of big-time college sports. He has degrees from Notre Dame and Washington University in St. Louis.