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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION
STATEMENT UNDER SECTION 14(d)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Amendment No. 8)
Terra Industries Inc.
(Name of Subject Company)
Terra Industries Inc.
(Name of Person Filing Statement)
Common Shares, without par value
(Title of Class of Securities)
880915103
(CUSIP Number of Class of Securities)
John W. Huey, Esq.
Vice President, General Counsel and
Corporate Secretary
Terra Industries Inc.
Terra Centre
600 Fourth Street
P.O. Box 6000
Sioux City, Iowa 51102-6000
Telephone: (712) 277-1340
(Name, address and telephone numbers of person authorized to receive notices
and communications on behalf of the persons filing statement)
Copies to:
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Faiza J. Saeed, Esq.
Thomas E. Dunn, Esq.
Cravath, Swaine & Moore LLP
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Telephone: (212) 474-1000
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David C. Karp, Esq.
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Telephone: (212) 403-1000 |
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Check the box if the filing relates solely to preliminary communications made before the
commencement of a tender offer. |
This Amendment No. 8 to Schedule 14D-9 amends and supplements the Solicitation/Recommendation
Statement on Schedule 14D-9 (as amended from time to time, the Statement) originally filed by
Terra Industries Inc., a Maryland corporation (Terra), with the Securities and Exchange
Commission on March 5, 2009, relating to the unsolicited offer by CF Industries Holdings, Inc., a
Delaware corporation (CF), through its wholly owned subsidiary, Composite Acquisition
Corporation, a Maryland corporation, as disclosed in the Tender Offer Statement on Schedule TO,
dated February 23, 2009 (as amended or supplemented from time to time, the Schedule TO), to
exchange each outstanding common share of Terra, without par value (Terra Common Share), for
0.4235 of a share of common stock, par value $0.01 per share, of CF (together with the associated
preferred stock purchase rights) (CF Common Share), upon the terms and subject to the conditions
set forth in (i) the Preliminary Prospectus/Offer to Exchange, dated February 23, 2009 (the
Exchange Offer), and (ii) the related Letter of Transmittal (which, together with the Exchange
Offer and any amendments or supplements thereto from time to time, constitute the Offer).
Capitalized terms used but not defined herein have the meanings set forth in the Statement. Except
as specifically noted herein, the information set forth in the Statement remains unchanged.
ITEM 2. IDENTITY AND BACKGROUND OF FILING PERSON.
Item 2. Identity and Background of Filing Person is hereby amended by restating the last
sentence of the first paragraph under the heading Offer in its entirety as follows:
On April 24, 2009, CF announced that it had extended the expiration date of the Offer, which
was originally scheduled to expire at 5:00 p.m., Eastern Time, on May 15, 2009, to 5:00 p.m.,
Eastern Time, on June 12, 2009, unless further extended. All other terms and conditions of the
Offer remained unchanged. On May 22, 2009, CF announced that it had further extended the
expiration date of the Offer, which was scheduled to expire at 5:00 p.m., Eastern Time, on June 12,
2009, to 5:00 p.m., Eastern Time, on June 26, 2009, unless further extended. All other terms and
conditions of the Offer remained unchanged.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
The following is hereby added under the heading Background of the Offer and Reasons for
RecommendationBackground of the Offer of Item 4. The Solicitation or Recommendation beginning
on page 8 of the Statement:
On the morning of March 27, 2009, Agrium publicly announced that it had revised its exchange
offer to acquire all outstanding CF Common Shares by increasing the cash portion of the
consideration from $31.70 to $35.00.
On March 29, 2009, CF issued a press release announcing that its board of directors has
recommended that CFs stockholders reject Agriums increased offer of March 27, 2009 to acquire all
outstanding CF Common Shares.
On March 30, 2009, Agrium filed with the SEC amendments to its Tender Offer Statement on
Schedule TO and Registration Statement on Form F-4 reflecting the terms of its increased offer to
acquire all of CFs outstanding common shares.
On April 13, 2009, the Board adopted an amendment to Terras Bylaws providing that Terras
annual meeting of stockholders will be held each calendar year on the date that is designated by
the Board, consistent with a recent change in Maryland law which eliminated the necessity for
companies to specify in their bylaws either a specific date or a 31-day period during which their
annual meeting must be held. On April 14, 2009, Terra filed with the SEC a Form 8-K announcing the
amendment.
On April 21, 2009, CF voluntarily withdrew its Notification and Report Form filed with respect
to the Offer on March 23, 2009 with the FTC and Antitrust Division under the HSR Act.
On April 24, 2009, CF announced that it had extended the expiration date of the Offer, which
was scheduled to expire at 5:00 p.m., Eastern Time, on May 15, 2009, to 5:00 p.m., Eastern Time, on
June 12, 2009, unless further extended. All other terms and conditions of the Offer remained
unchanged.
On May 4, 2009, CF re-filed its Notification and Report Form with respect to the Offer with
the FTC and Antitrust Division under the HSR Act.
On May 11, 2009, Agrium publicly announced that it had revised its exchange offer to acquire
all outstanding CF Common Shares by increasing the cash portion of the consideration from $35.00 to
$40.00. Agrium also announced that it had extended the expiration of the Agrium Offer until 12:00
midnight, Eastern Time, on June 15, 2009.
On May 15, 2009, CF issued a press release announcing that its board of directors rejected
Agriums revised offer of May 11, 2009 to acquire all outstanding CF Common Shares.
On May 22, 2009, CF announced that it had extended the expiration date of the Offer, which was
scheduled to expire at 5:00 p.m., Eastern Time, on June 12, 2009, until 5:00 p.m., Eastern Time, on
June 26, 2009, unless further extended. All other terms and conditions of the Offer remained
unchanged.
On June 3, 2009, CF issued a press release announcing that it had received a Request for
Additional Information (the Second Request) from the FTC in connection with its proposed business
combination with Terra. The Second Request extends the waiting period under the HSR Act during
which the FTC is permitted to review the transaction for up to an additional 30 days following CFs
compliance with the Second Request, unless earlier terminated.
On the same day, Agrium reaffirmed its offer for CF and extended the expiration of the Agrium
Offer until 12:00 midnight, Eastern Time, on June 22, 2009, from June 15, 2009.
Item 4. The Solicitation or Recommendation is hereby amended and supplemented by adding the
following at the end of the last sentence of the twelfth paragraph under the heading Background of
the Offer and Reasons for RecommendationBackground of the Offer: (which was based on various
discussions held between Terras management and its key stockholders).
Item 4.
The Solicitation or Recommendation is hereby further
amended by restating the bullets under the heading
Background of the Offer and Reasons for RecommendationReasons for RecommendationA combination
with CF runs counter to Terras strategic objectives which are designed to provide substantial
value differentiators to Terras stockholders in their
entirety as follows:
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For several years, Terra has deliberately pursued a strategy of lowering its dependence on
agricultural urea and ammonia sales by, among other things, upgrading its product mix to UAN
and industrial ammonium nitrate (AN) and increasing its sales into the industrial and
environmental markets. A combination with CF would shift that focus back to agricultural urea
and ammonia, which represent 70% of CFs nitrogen sales and only 16% of Terras. The Board
believes that maintaining Terras focus on UAN and AN markets and continuing to move toward
an increased percentage of higher-value upgraded products in accordance with current strategy
will deliver significantly more value to Terras stockholders. The relative value premiums of UAN
and AN over urea and ammonia, and market trends underlying these
premiums, support this view.1 |
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A key element of Terras strategic plan is broad geographic diversification. For example, Terra has
deliberately located its core manufacturing assets away from the U.S. Gulf Coast, where import
competition is most severe. In addition, Terras geographic plant positions in Oklahoma and Iowa
provide Terra with favorable transportation cost to its customers located in the Corn Belt as
compared to its U.S. Gulf Coast competitors, and its joint venture in Trinidad provides it with
access to advantaged natural gas. Of CFs total ammonia production volumes, 73% is located on
the U.S. Gulf Coast whereas 65% of Terras is located inland or in gas advantaged countries. As
part of its strategy, Terra also invests in plants outside of North America, such as its GrowHow
joint venture in the United Kingdom, so as to minimize the inherent risk of business concentration
in a single region. |
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Terra has spent much of the last nine years developing its environmental services business in both
stationary and, more recently, automotive markets so as to diversify its customer base outside of
core agricultural markets. This business diversification approach has not been evident at CF and
the Board believes a combination of CFs business with Terra may jeopardize the focus necessary
to grow this business. |
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According to Blue, Johnson & Associates, Inc., a leading provider of market information and
analysis in the fertilizer industry, (i) from 2003 through 2008, the average price per pound of
nitrogen contained in UAN was $0.021 and $0.100 higher than that in urea and ammonia,
respectively, and is projected to be higher by $0.093 and $0.162, respectively, from 2009 through
2014, and (ii) from 2003 through 2008, the average price per pound of nitrogen contained in AN
was $0.069 and $0.149 higher than that in urea and ammonia, respectively, and is projected to be
higher by $0.191 and $0.256, respectively, from 2009 through 2014. |
Item 4. The Solicitation or Recommendation is hereby further amended and supplemented by
adding the following at the end of the first sentence under the heading Background of the Offer
and Reasons for RecommendationReasons for RecommendationThe Offer is opportunistic and
substantially undervalues Terra on both an absolute basis and relative to CF: (particularly with
respect to Terras Environmental Technologies business).
Item 4.
The Solicitation or Recommendation is hereby further
amended by restating the second bullet under the heading Background of the Offer and Reasons for
RecommendationReasons for RecommendationThe Offer is opportunistic and substantially
undervalues Terra on both an absolute basis and relative to
CF in its entirety as follows:
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The Offer was made at a time when Terras stock price was temporarily depressed relative to CFs
stock price. CFs opportunistically timed Offer does not provide a premium relative to the historic
average trading prices. The Board believes that the divergence in relative trading prices of the
companies during most of 2008 is temporary and primarily due to the performance of CFs
phosphate business over that comparatively brief period. During 2008, CFs phosphate margin
increased 233% (or $316.4 million) over its average phosphate margin for 2006 and 2007. CF, in
contrast, reported a $120.2 million decline in its phosphate margin for the first quarter of 2009 as
compared to the quarterly average of 2008, reflecting a $7.1 million loss for the quarter. The
increase in the relative profitability of the phosphate business compared to the nitrogen business
during 2008 drove a temporary value discrepancy that the Board believes is not sustainable and
does not reflect the relative value of the companies over the period from CFs initial public
offering through 2008, which the Board believes is a more appropriate valuation period. During
that period, the average exchange ratio between the stocks of the two companies was 0.4059, over
which CFs Offer provides only a 4.33% premium. |
Item 4.
The Solicitation or Recommendation is hereby further
amended by restating the fourth bullet
under the heading Background of the Offer and Reasons for RecommendationReasons for
RecommendationThe Offer is opportunistic and substantially undervalues Terra on both an absolute
basis and relative to CF in its entirety as follows:
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As of February 24, 2009, the day prior to the announcement of the Agrium Offer and accordingly the last day on which CFs stock was unaffected by the Agrium Offer, Terras stock price was trading at an exchange ratio of 0.4466 relative to CFs stock price which is 5.4% above CFs Offer. |
Item 4. The Solicitation or Recommendation is hereby further amended by deleting the words
and other execution from the fourth sentence under the heading Background of the Offer and
Reasons for RecommendationReasons for RecommendationCFs projected synergies claims are
aggressive and the combination is subject to substantial execution risk.
Item 4. The Solicitation or Recommendation is hereby further amended and supplemented by
adding the words the Board believes after the word which in the second sentence under the
heading Background of the Offer and Reasons for RecommendationReasons for RecommendationTerra,
on a stand-alone basis, will deliver greater value for its stockholders than CFs Offer.
Item 4.
The Solicitation or Recommendation is hereby further
amended by restating the second paragraph under the heading Background of the Offer and Reasons for
RecommendationReasons for RecommendationTerra, on a stand-alone basis, will deliver greater
value for its stockholders than CFs Offer in its
entirety as follows:
The Board believes that Terras experienced management team is critical to the Companys
current and future performance. Terra is led by a seasoned nitrogen industry management team that has
successfully navigated the Company through numerous industry cycles. The Board believes that
management has strategically positioned Terra for current and future market environments through a series
of significant, effectively integrated acquisitions and investments in plant efficiencies. At the same time,
the Board believes management has maintained a highly disciplined cost structure with a rigorous focus on
value creation and maximizing stockholder returns. Over the past three years, Terra has returned 35% of its
net income to stockholders in the form of share repurchases and dividends.
ITEM 8. ADDITIONAL INFORMATION.
Item 8. Additional Information of the Statement is hereby amended and supplemented by adding
the following under the heading Regulatory ApprovalsU.S. Antitrust Approval:
On April 21, 2009, CF voluntarily withdrew its Notification and Report Form filed with respect
to the Offer on March 23, 2009 with the FTC and Antitrust Division under the HSR Act, and re-filed
it on May 4, 2009. On June 3, 2009, CF issued a press release announcing that it had received the
Second Request from the FTC in connection with its proposed business combination with Terra. The
Second Request extends the waiting period under the HSR Act during which the FTC is permitted to
review the transaction for up to an additional 30 days following CFs compliance with the Second
Request, unless earlier terminated.
Item 8. Additional Information of the Statement is hereby amended by restating the paragraph
under the heading Forward-Looking Statements in its entirety as follows:
Certain statements in this Statement may constitute forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Statements made in connection with
the Offer are not subject to the safe harbor protections provided to forward-looking statements
under the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based
upon assumptions as to future events that may not prove to be accurate. These statements are not
guarantees of future performance and involve risks, uncertainties and assumptions that are
difficult to predict. Actual outcomes and results may differ materially from what is expressed or
forecasted in these forward-looking statements. As a result, these statements speak only as of the
date they were made and Terra undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future events or otherwise,
except as otherwise required by law. Words such as expects, intends, plans, projects,
believes, estimates, and similar expressions are used to identify these forward-looking
statements. These include, among others, statements relating to changes in financial markets,
general economic conditions within the agricultural industry, competitive factors and price changes
(principally, sales prices of nitrogen and methanol products and natural gas costs), changes in
product mix, changes in the seasonality of demand patterns, changes in weather conditions, changes
in environmental and other government regulation, and changes in agricultural regulations.
Additional information as to these factors can be found in Terras 2008 Annual Report/10-K, in the
sections entitled Business, Legal Proceedings, and Managements Discussion and Analysis of
Financial Condition and Results of Operations and in the notes to the Companys consolidated
financial statements.
ITEM 9. EXHIBITS.
Item 9 is hereby amended and supplemented by adding the following exhibit.
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Exhibit Number |
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Description |
(a)(10)
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Terra Industries Inc. Investor Presentation dated June 18,
2009 (incorporated by reference to Terra Industries Inc.s
Rule 425 filing on June 18, 2009). |
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that the information
set forth in this Statement is true, complete and correct.
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TERRA INDUSTRIES INC.
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By: |
/s/ John W. Huey
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Name: |
John W. Huey |
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Title: |
Vice President, General Counsel
and Corporate Secretary |
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Dated: June 18, 2009