On Monday, CF had
for Terra after five earlier tries, offering $32 in cash plus a fraction of a CF common share for each Terra share, lifting the value of the proposed deal to about $4.1 billion, or $40.61 a share.
Terra shares ended trading Tuesday at $34.88; in premarket trading Wednesday, they were changing hands at $35.
Terra -- which has hired two anti-takeover heavyweights, the New York law firms Cravath Swain & Moore and Wachtell Lipton, to help it thwart CF's advances -- said in a press release Wednesday morning that its board has "unanimously rejected
the bid as inadequate, opportunistic and not in the best interests of Terra and its shareholders."
There may be at least some merit to Terra's claims. It's been understood that CF has pursued Terra largely as a way to put off the advances of its own unwanted suitor,
As for Terra, it said it continues to feel the CF offer "undervalues" the company. Its board went so far as to suggest a price at which it might agree to a deal. Using several of CF's own metrics, including a multiple of 6.7 times earnings before interest, taxes, depreciation and amortization, and an "industry acquisition multiple" of 7.6 times mean EBITDA, Terra said its enterprise value would be $4.65 billion using the former model and $5.27 billion the latter, or $51.55 and $57.74 per share, respectively.
At this last price, Terra went on, a purchase of Terra "would still be substantially accretive to CF."
Terra also said that CF has vastly underestimated its earnings potential. Terra projects 2010 EBITDA of $694 million, while CF's calculations forecast EBIDTA of $525 million.
"CF's latest proposal fails to appropriately value Terra's world-class assets, strategic advantages and prospects," Terra's chief executive, Michael Bennett, said in a written statement. "Terra is a preeminent pure play nitrogen company, and through the continued execution of our strategy is well positioned to take advantage of an upsurge in demand from our agricultural and industrial customer base as the economic recovery continues."
-- 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.