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ADDITIONAL INFORMATION ON CASH MERGER AGREEMENT WITH TERRA

Feb 17, 2010

 Not for distribution into the United States

Oslo (2010-02-17): Reference is made to the stock exchange notice by Yara International ASA ("Yara") on 15 February 2010 regarding the signing of a cash merger agreement with Terra Industries Inc. ("Terra"). In accordance with Oslo Børs Continuing Obligations Article 3.4, certain additional information regarding the contemplated transaction is set out below.

 

The Transaction and its Rationale

As set out in the stock exchange notice of 15 February 2010 Yara has signed a cash merger agreement with Terra pursuant to which Yara will acquire all of the outstanding shares of Terra common stock for USD 41.10 per share in cash. The contemplated transaction has a total equity value of approximately USD 4.1 billion. Yara intends to fund a portion of the transaction through the planned USD 2.02.5 billion rights issue. Yara has not yet committed to any project specific debt financing. The rights issue, which is supported by an equity bridge and which is fully underwritten, excluding the Norwegian State's share, will secure a strong position for further funding. Additionally, Yara has undrawn committed loan agreements of USD 1.5 billion in place and expects a cash receipt of approximately USD 620 million from the sale of Fosfertil shares in the second quarter of 2010.

 

Yara is committed to the US market, and this transaction presents an attractive opportunity for both companies to strengthen their positions in the US. Yara and Terra are a perfect fit, and the combination will elevate Yara to a truly global leader in the industry. Both companies are strong in ammonia and nitrates, and have complementary geographical footprints. Terra's ammonia and upgraded fertilizer distribution systems in the US will be combined with Yara's global sourcing and optimization capabilities as the world's largest producer and trader of fertilizer and ammonia.

 

The merger agreement is signed on the basis of Yara's proven M&A value creating track record, a positive fertilizer market outlook and the improved competitive edge of US nitrogen producers. The structural changes over the last years in the global and U.S. gas market with ample LNG and shale gas have strongly improved the cost position of U.S. producers. North American producers are in addition benefiting from logistical advantages as the US will continue to need large imports of nitrogen, and the high construction costs for new plants now favors existing production capacity.

 

Yara has identified yearly cost synergies with pre-tax effects of USD 60 million to be harvested within a year after closing. In addition, Yara is targeting soft synergies of the same magnitude, including improved utilization and optimization of logistical systems.

 

Neither Yara nor Terra have entered into, or expects to enter into, any agreements in connection with the merger for the benefit of its senior employees or members of the board of directors.

 

Terra Industries Inc.

Terra is a leading international producer of nitrogen products for agricultural, industrial and environmental markets. Terra owns and operates six North American nitrogen products manufacturing facilities and owns a 50% interest in joint ventures in the United Kingdom and The Republic of Trinidad and Tobago. Terra headquarters is in Sioux City, Iowa. Terra provides products that are essential to meeting the needs of a growing global population. Terra's nitrogen product line includes ammonia, urea ammonium nitrate solutions (UAN), ammonium nitrate (AN) and urea. With the capacity to produce approximately 6.5 million tons of product at its North American facilities annually, Terra is an imporant contributor to the markets it serves. Terra employs approximately 938 people and is listed on the New York Stock Exchange with ticker symbol TRA.

 

The Board of Directors of Terra consists of: Henry Slack (Chairman of the Board), Michael Bennett, David Fisher, Martha Hesse, Dod Fraser, Peter Janson, James Kroner, Dennis McGlone, John Lilly, David Wilson and Irving Yoskowitz.

 

The senior management of Terra consists of: Michael Bennett (President, Chief Executive Officer and Director), Daniel Greenwell (Chief Financial Officer, Senior Vice President), Douglas Stone (Senior Vice President, Sales and Marketing), Joseph Giesler (Senior Vice President, Commercial Operations), John Huey (Vice President, General Counsel, Corporate Secretary), Edward Dillon (Vice President, Controller) Joe Ewing (Vice President,Investor Relations and Human Resources), Richard Sanders (Vice President, Manufacturing), Geoffrey Obeney (Vice President, Information Technology) and Earl Smith (Vice President, Business Development).

 

Below is a summary of key figures from the profit and loss account and balance sheet of Terra:

 

Income Statement

In USDmm

2006

2007

2008

9M08

9M09

LTM

Product Revenues

1,816

2,336

2,880

2,198

1,216

1,898

Other Income

4

7

11

10

4

5

Total Revenue

1,820

2,343

2,891

2,208

1,220

1,904

Cost of Sales

(1,701)

(1,815)

(2,028)

(1,532)

(921)

(1,417)

SG&A

(68)

(92)

(71)

(58)

(50)

(62)

Other Operating Expenses(1)

-

-

-

-

(14)

(14)

Equity in Earnings of North American Unconsolidated Affiliates(2)

17

16

56

46

11

21

Income from Operations

67

452

849

663

246

432

Interest Income

6

17

23

19

4

8

Interest Expense

(48)

(29)

(27)

(21)

(20)

(27)

Loss on Early Retirement of Debt

-

(39)

-

-

-

-

Income before Income Taxes, Non-Controlling Interest
and Equity Earnings of GrowHow UK

26

401

845

662

229

412

Income Tax Provision

(10)

(127)

(240)

(230)

(56)

(66)

Non-Controlling Interest

(11)

(50)

(68)

(52)

(20)

(36)

Equity Earnings of Unconsolidated Affiliates(2)  - GrowHow UK

-

(3)

96

89

2

9

Net Income Attributable to Terra Industries - Continuing

5

221

633

469

156

320

Income/(Loss) from Discontinued Operations - Net of Tax(3)

(1)

(19)

8

8

1

1

Net Income Attributable to Terra Industries

4

202

641

476

156

321

Source: Company filings

(1) Other operating expenses of $14.3 million represents costs associated with the unsolicited exchange offer by CF

(2) Investments accounted for on the equity method of accounting consist of: (i) 50% ownership interest in Point Lisas Nitrogen Limited (PLNL), (ii) 50% interest in an ammonia storage joint
venture located in Houston, Texas and (iii) 50% interest in a joint venture in Oklahoma CO2, located in Verdigris, Oklahoma

(3) On December 31, 2008, Terra sold its Beaumont, Texas assets, including the methanol and ammonia production facilities, to Eastman Chemical Company (Eastman)

 

 

Balance Sheet

In USDmm

2006

2007

2008

3Q08

3Q09

Cash & Cash Equivalents

179

698

967

681

1,001

Accounts Receivables

199

171

130

236

104

Inventories

211

129

197

176

111

Other Current Assets

32

29

98

194

69

Current Assets of Discontinued Operations

-

2

-

46

-

Total Current Assets

621

1,030

1,392

1,332

1,285

Property, Plant & Equipment (Net)

721

390

403

407

435

Equity Method Investments

164

352

271

383

253

Other Non Current Assets

67

74

46

61

58

Non Current Assets of Discontinued Operations

-

43

-

-

-

Total Non-Current Assets

952

858

721

851

747

Total Assets

1,573

1,888

2,113

2,183

2,031

Accounts Payable

156

111

100

124

71

Customer Prepayments

77

299

112

195

41

Other Current Liabilities

76

103

254

332

65

Current Liabilities of Discontinued Operations

-

5

-

3

-

Total Current Liabilities

309

518

465

654

176

Long Term Debt

331

330

330

330

330

Other Non-Current Liabilities

238

194

149

63

172

Non-Current Liabilities of Discontinued Operations

-

1

-

79

 

Total Non-Current Liabilities

570

525

479

472

502

 

 

 

 

 

Total Liabilities

879

1,042

944

1,126

679

Preferred Shares

116

116

2

2

0

Total Stockholder's Equity

483

620

1,059

959

1,257

Non Controlling Interest

95

110

108

96

96

Total Equity

578

730

1,167

1,055

1,352

Total Liabilities and Stockholder's Equity

1,573

1,888

2,113

2,183

2,031

Source: Company filings. 2006 Figures not restated

-

-

-

-

-

 

 

Additional financial information

 

Significant subsequent events of Terra to the key figures above include:

 

  • 29 October 2009: Terra announced that its Board of Directors had declared the previously announced special cash dividend of USD 7.50 per share (payment date: 11 December 2009). Through the special cash dividend, Terra returned an aggregate of approximately USD 750 million to shareholders
  • 27 October 2009: Terra Capital, a wholly-owned subsidiary of Terra, announced the completion of its cash tender offer for its outstanding USD 330 million 7.00% Senior Notes due 2017. As of the expiration date, Terra Capital had received tenders from holders of approximately USD 317.5 million aggregate principal amount. Terra Capital funded the purchase of these notes with the proceeds of its completed sale of 7.75% Senior Notes due 2019
  • 26 October 2009: Terra Capital, a wholly-owned subsidiary of Terra, announced the closing of its private offering of USD 600 million aggregate principal amount of Senior Notes due 2019. The notes bear an interest rate of 7.75% per annun and were issued at a price equal to 98.298% of their face value.

 

Advisors

 

Citigroup is serving as Yara's financial advisor, and Latham & Watkins LLP and Wikborg, Rein & Co are serving as legal advisors to Yara in connection with the Merger.

 

Citigroup, Deutsche Bank AG and Nordea Bank Norge ASA will act as lead managers and joint bookrunners to Yara in connection with the rights issue, while Latham & Watkins LLP and Wikborg Rein & Co will serve as legal advisors to Yara in connection with the rights issue..

 

 

Contact

 

Torgeir Kvidal, Investor Relations

Telephone  (+47) 24 15 72 95

Cellular (+47) 91 33 98 32

E-mail torgeir.kvidal@yara.com

 

Asle Skredderberget, Media Relations

Cellular (+47) 41 44 36 10

E-mail asle.skredderberget@yara.com

 

 

Yara International ASA is the world's leading chemical company that converts energy, natural minerals and nitrogen from the air into essential products for farmers and industrial customers. As the number one global supplier of mineral fertilizers, we help provide food for a growing world population. Our industrial product portfolio includes environmental protection agents that prevent air pollution. Yara's global workforce of 8000 employees represents the great diversity and knowledge that enables Yara to remain a leading performer in the industry.

www.yara.com

 

 

This announcement is not an offer of securities for sale in the United States.  Securities offered pursuant to the transaction referred to in the announcement may not be offered in the United States absent registration or an exemption from such registration.  Any offering of securities for sale in the United States will be made only by means of an offering circular that will contain detailed information regarding Yara and such securities as well as the financial statements of Yara.  Such offering circular will be provided only to shareholders and others in compliance with the relevant exemptions from registration.
 
This information is subject of the disclosure requirements acc. to §5-12 vphl (Norwegian Securities Trading Act)
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