With an all-important proxy vote looming on Friday, Terra Industries today sent a pair of letters to shareholders Monday.

In the second letter, the Sioux City-based company reminded shareholders that three independent proxy advisor firms — Glass Lewis, Proxy Governance and Egan-Jones Proxy Services — all recommend a vote for Terra-backed directors, rather than a rival slate nominated by CF Industries.

The other letter blasted the nation’s leading proxy advisor, RiskMetrics, for its recommendation that Terra shareholders accept CF’s hostile bid for the Sioux City-based company.

In a letter Friday, CF trumpeted the decision by RiskMetrics, whose opinions have carried weight in past hostile-takeover-related shareholder votes. Of the largest 50 mutual fund companies, 43 are clients of RiskMetrics, according to its Web site.

Clearly aware of RiskMetrics’ potential influence, Terra fired off a letter attempted to discredit RiskMetrics’ conclusions, which Terra called “fundamentally flawed.”

Among other things, Terra argued RiskMetrics’ recommendation is contradictory because it does not endorse CF’s current offer as “an offer Terra or its shareholders should accept.”

In its report, RiskMetrics noted that “although Terra shareholders may in the aggregate believe they deserve more than the current offer on the table, we note that the Terra board has had almost an entire year to find an alternative transaction or negotiate an agreed deal at a higher price with CF.”

Read the full letter in which Terra critiques RiskMetrics’ recommendation, here.

Also read the letter Terra sent Monday that highlights the recommendations of Glass Lewis, Proxy Governance and Egan-Jones Proxy Services, here.

CF Industries, which launched a hostile bid for Terra Industries in January, keeps on upping the ante, hoping that the Sioux City-based company will finally bite. Late Sunday, CF slightly raised its offer, including cash for the first time as I reported this morning, “CF adds cash to hostile bid for Terra.”

Read the full terms of the revised offer in CF’s news release, click here.

A portion of Terra Industries’ Port Neal facility south of Sioux City is shown above. (Sioux City Journal photo by Tim Hynds)

Monday was another busy day of public disclosures for Terra Industries. The Sioux City-based company announced that it had agreed to buy a 50 percent interest in a Canadian nitrogen plant owned by Agrium Inc. As I reported, the $250 million deal could help both companies in their respective hostile takeovers involving rival CF Industries, “Terra, Agrium join forces to fight CF.”

To help finance the Agrium plant deal, Terra also announced plans to issue $600 million in debt capital in a private offering.”

And, Terra gave investors a hint of its third quarter earnings, which will be fully released on Thursday. The preliminary results were not pretty, as the company said it expects its earnings to plummet 72 percent, compared to the year-ago quarter.

Though brutal the numbers were in line with what analysts are expecting, giving the tough environment in the fertilizer industry.

CF Industries, looking to bolster its bid for rival fertilizer maker Terra Industries, announced today it had purchased 5 percent of Terra shares in the open market.

Deerfield, Ill.-based CF also released a draft of a proposed merger agreement between the two companies.

“With the draft merger and share purchases, CF is really saying, ‘We’ve set the table, the food is cooking, and we expecdt you to sit down to negotiate. CF is clearly not going away,” Louis Meyer, an analyst at Oscar Gruss & Son in New York, told Bloomberg News,.

CF’s latest salvo follows two moves last Thursday by Terra aimed at making the Sioux City-based company less attractive for a takeover. Terra said it would return $750 million to shareholders in a special cash dividen, issue an additional $600 million in debt and buy back $300 million in senior notes.

Ben Johnson, a senior analyst with Morningstar, said Terra is “clearly taking a lesson from the noble blowfish in an attempt to ward off a predatory bid.”

“When the dust settles, Terra would have approximately $500 million of cash in the bank and move from a net cash position of about $6.74 per share (as of June 30) to holding approximately $100 million in net debt on its balance sheet,” Johnson wrote on Morningstar’s Web site last Friday.

“This course of action simultaneously makes Terra look less appetizing to CF while taking care of Terra’s own shareholders in a manner that is palatable and in which Terra maintains its solid financial footing.”

Terra Industries, which recently set the date for its annual meeting, today issued a letter to its shareholders, urging them to support the Sioux City-based company’s efforts to fight off a hostile takeover from rival fertilizer manufacturer CF Industries.

A copy of the letter is attached below. In the letter, the company and its board of directors highlights the following points:

– As of Aug. 28, ”Terra had a strong cash position totaling in excess of $1 billion, or more than $10 per share, and a strong balance sheet with minimal debt.”

– ”CF’s proposal is opportunistic and substantially undervalues Terra on both an absolute basis and relative to CF.”

– ”CF’s proposal would deliver less value to Terra shareholders than would be delivered by Terra’s board and management continuing to execute our strategic plan.”

– ”CF shareholders are unlikely to approve a transaction with Terra if given the alternative” a competing offer for CF to combine with the Canadian ag giant Agrium.

Terra plans to hold its annual meeting for Nov. 20 for shareholders as of record Oct. 9. NOTE: Some of my earlier reporting included an incorrect date for the annual meeting.

terra-sends-letter-to-shareholders.pdf

In a post today, New York Times financial blogger David M. Davidoff examines the latest moves by fertilizer rival Terra Industries and CF Industries as the former tries to fend off a hostile takeover from the latter, “Closure on the forever war.”

On Monday, hours after CF announced it had gone to court to force Sioux City-based Terra to hold its annual shareholders meeting, Terra issued its own news release, saying its board on Aug. 25 had already set a date for the meeting.

As it stands now, the meeting would be held Nov. 19 at a yet-to-be-determined site — nearly seven months after the company’s 2008 meeting. Maryland law, where Terra is incorporated, requires publicly-traded companies to hold its annual meeting within a calendar year. But Davidoff suggests vagueness in the law could allow the company to push back the date even further.

“Moreover, expect CF to keep its lawsuit live to maintain pressure on Terra,” Davidoff writes. “This is a more real force on Terra and it means that there will most likely be a firm meeting date by the end of November, if not a meeting by December. And December is a lovely time of year to be in Sioux City, Iowa, Terra’s headquarters.”

Terra Industries management has few good reasons to turn down a sweetened offer from rival fertilizer maker CF Industries, a blogger on a popular online stock market advice site writes this week, “Can the Terra board afford not to accept sweetened CF bid?”

Last week, CF increased its bid for Terra to .465 shares of CF for each Terra share. The deal currently values Sioux City-based Terra at nearly $39 share (.465 x $83 CF share) or 30 percent above its Friday closing price of $29.91.

“Why would they turn down the premium and the similar upside from CF?” a blogger on the site, Seeking Alpha, writes. “It’s not as if they are being acquired by a conglomerate that has less growth potential and hence it would stunt the long term potential of existing shareholders.

“In CF shares, TRA shareholders get a similar stock with 30 percent more value. Isn’t 30 percent today better then the promise of 30 percent in the future?… Turning down the deal makes it seem as if the Board isn’t fulfilling its fiduciary responsibilities.”

Terra’s board said it will consider the latest CF offer at a meeting later this month.

CF Industries Holdings Inc. upped the ante this morning in its proposed takeover of Sioux City-based Terra Industries.

Deerfield-based fertilizer CF said it would raise its fixed exchange ratio to 0.465 shares of CF Industries for each Terra common share, “CF Industries to raise Terra offer.”

The new takeover bid values Sioux City-based Terra at $37.20 per share, more than double its closing price before CF’s first offer was announced in January.

Update: Terra, in a statement issued this afternoon, said its board of directors would review CF’s revised offer at a meeting later this month.

Despite its proposed takeover of fertilizer rival CF Industries rapidly losing support over the last month, Agrium Inc. said today it remains committed to the deal, “Tendered shares for Agrium slump in last month.”

Agrium disclosed Monday that just 21 percent of CF shares had been tendered, down from 62 percent late last month. CF holders have withdrawn their support in droves as the Deerfield, Ill-based company has dug in, relying on a poison pill and other defense mechanisms.

CF has treated the hostile takeover bid from Canadian giant Agrium as little more than a nuisance, locking in on its own efforts to buy Sioux City-based Terra Industries. Agrium’s offer would require CF to drop its pursuit of Terra, which has repeatedly rebuffed CF’s unsolicited overtures.

Both CF and Agrium are bidding to become the dominant fertilizer maker in North America.

Terra is scheduled to release it second quarter earnings on Thursday.

Agrium is turning up the heat today on rival fertilizer maker CF Industries,
”Agrium says CF still resisting”

Agrium CEO Mike Wilson said CF management is disregarding the wishes of its shareholders — 62 percent of whom had tendered their stock to Agrium’s offer as of last week — by continuing to resisting takeover efforts.

CF is pursuing its own hostile takeover bid of Sioux City-based Terra Industries. As a condition of Agrium’s offer, CF would be required to drop its tender exchange offer for Terra, which has repeatedly rebuffed a negotiated deal.

In a statement, Mike Wilson says CF CEO Stephen Wilson indicated he was not willing to meet to discuss the nearly $4 billion deal because nothing has changed.

Agrium, which is offering $40 in cash plus one Agrium share for every CF share, is still pursuing its hostile bid for CF. The bid was extended last week to July 22.

Agrium, based in Calgary, Alberta, Canada, has a presence in Siouxland. I was reminded of that over the weekend, as I drove by Agrium’s two huge ammonia storage tanks along U.S. Highway 71, just north of Early, Iowa. The refrigerated storage tanks, which store 73,000 tons of ammonia, are a landmark for miles around.