Terra Steps Up CF Attack Ahead of Vote - TheStreet

SIOUX CITY, Iowa (TheStreet) -- As Terra Industries (TRA) prepares for a crucial shareholder vote at its annual meeting on Friday, the company's management sent a letter to that constituency Monday urging them to spurn the advances of CF Industries (CF) - Get Report, which has been pursuing a hostile bid for Terra since January.

Deerfield, Ill.-based CF, which sweetened its buyout offer for Terra last week, has nominated a slate of three dissident candidates for election to Terra's board.

In its letter on Monday, Terra said yet again that CF's bid "continues to significantly undervalue" the Iowa-based fertilizer maker.

"Terra is a preeminent 'pure play' nitrogen company," the letter read. "Our product mix, diversified agricultural and industrial customer base and geographic advantages leave us well-positioned to benefit from the economic recovery and the expected upsurge in nitrogen demand."

Terra also repeated the views of three proxy adviser firms that had advocated, pro-Terra, for reelection of the company's incumbent directors.

One of the pro-Terra firms, Proxy Governance, said that "CF's strategy for the combined company would diversify away some of the benefits of the strong competitive position Terra's board and management have built over the years."

Another, Egan-Jones, said, "Terra's Board has been consistent in its assessment of the proposals and the lack of strategic or financial merit in a combination between Terra and CF."

Meanwhile, Terra again lambasted a fourth proxy advisor, RiskMetrics, which came out

in favor of CF last week

, saying that the firm's report on the matter was "flawed and contradictory." Terra said that RiskMetrics' conclusion "concedes that CF's proposal is inadequate, yet it recommends that Terra shareholders elect CF's three nominees to the board anyway."

Under the terms of the current offer, CF would pay $32 cash plus 0.1034 of a CF share for every one of Terra's shares. As it stands today, the deal would value Terra at about $40.41 a share.

Terra's stock price at the end of Monday's trading stood at $37.52. Using its own metrics, as well as an "industry acquisition multiple" of 7.6 times mean earnings before interest, taxes depreciation and amortization, Terra has argued that its real value ought to be between $51.55 and $57.74 a share.

A noted proxy adviser that has influenced shareholders in such votes before, RiskMetrics was offering a core argument that by booting three of Terra's current directors, shareholders could impel a stronger deal down the road. The adviser suggested in its report that Terra should have made a more concerted effort to negotiate with CF at some point during the protracted mating ritual.

Terra's rebuttal to this claim was only that CF's offer was "opportunistic" and motivated simply by the collapse in fertilizer-makers' share prices amid the recession.

CF, of course, has found itself in a

position similar to Terra

. Rival



has been pursuing CF almost as long as CF has been after Terra. Agrium, in turn, has met with similar results.

-- Written by Scott Eden in New York

Follow TheStreet.com on


and become a fan on


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.