Heading into a long holiday weekend, speculation on Wall Street is rampant over what move Terra Industries President and CEO Mike Bennett and his management team will make next.

“In the latest chapter of the fertilizer wars, Terra Industries has retrenched in its effort to thwart a hostile takeover bid from CF Industries’ — or, possibly, Terra is simply starting off the negotiation process with a few hardball tactics, in effect playing hard-to-get so as to bring a better price to the table,” the Street.com reports, “Terra CF-Agrium deal drama continues.”

New York Times blogger Steven M. Davidoff, writing as “The Deal Professor,” calls Terra’s decision to expand the size of its board to 11 members from eight and fill the new seats with the same director nominees who had only been defeated a few days before a “rather bold move.”

“The board expansion itself is not a significant problem for CF,” Davidoff writes. “Rather, the problem is the signal that it sends to CF that Terra is still willing to resist and even a year from now may be willing to take even more aggressive steps.

Davidoff goes into great detail about how the laws of Maryland, where Terra is incorporated, could protect the Sioux City-based company if it wants to continue to resist CF’s overtures.

“I suspect that CF will stay in this game. Agrium will as well, if for no other reason than it can still create obstacles to CF’s bid at a low cost to itself. The question is what Terra will do — and the signals are not good for CF.”

Another New York Times financial blog, the DealBook, speculates whether Terra, rather than pressing CF to come up with a higher bid, may be stalling for a “white-knight,” to come to its rescue.

One rumored white knight, according to the blog, is Yara International of Norway, the world’s largest fertilizer maker. The blog notes there has been “no indication that Yara is interested in doing a deal.”

If a takeover appears imminent, Terra might very well want to put together its own, more lucrative deal, rather than be forced to accept one from CF.

Though Terra would still lose its independent status, an acquisition by Yara might be better for Sioux City. As a firm based in Europe, Yara might want to retain a U.S. division at Terra’s current home in Sioux City.

Deerfield, Ill.-based CF, on the other hand, has pitched a combination of the two Midwest companies as an opportunity to save millions of dollars by eliminating duplication in administrative functions. In Sioux City, that’s been seen as code for cutting dozens of well-paid white collar jobs based in the Terra Centre.

CF Industries scored a big victory this morning at Terra Industries’ annual meeting in New York, as shareholders overwhelmingly voted to replace three Terra directors with three CF-nominated candidates, “CF claims victory.”

The victory strengthens CF’s hand in its bid to takeover the Sioux City-based company. Terra, which has repeatedly rejected CF’s hostile bid as inadequate, took a more conciliatory approach in a statement issued after the vote.

“…Terra shareholders noted that current trends in the fertilizer market could provide potential consolidation opportunities for many market participants. Terra’s board, as always, will continue to maintain an open-minded approach to considering any bona fide opportunity to create meaningful value for Terra shareholders.”

What will Terra’s next move be? Stay tuned. What do you think about the outcome today? Let us know.

No matter how proxy vote at Terra Industries’ shareholders’ meeting Friday turns out, the three-way fight between Terra, CF Industries and Agrium, called the “forever war” by some Wall Street analysts, has the potential to draw on for a very long time, if not forever.

In New York City Friday, Terra shareholders will decide whether to re-elect three incumbent board members or three challengers nominated by CF, which has been doggedly pursuing a hostile takeover of Terra since January. Check out my story online and in print Friday on what the loss of Terra’s Sioux City headquarters could mean for the community, “City leaders say much at stake in today’s vote.”

A CF victory presumably would put the Deerfield, Ill-based company in the driver’s seat to force a combination. But Terra, which would still control five of the eight seats on the board, could very well decide to try to fend off CF by launching additional defenses.

On the other hand, a Terra victory would more than likely allow the Sioux City-based company to remain independent. But some analysts expect CF to make one last significantly higher offer before throwing in the towel, however.

Canadian ag giant’s Agrium’s own pursuit of CF muddies the waters. On Thursday, Agrium announced that 62 percent of CF shareholders now back its $5.1 billion buyout offer, which had been scheduled to expire at midnight Wednesday “Majority of CF shareholders support Agrium bid.” Despite the widespread support, CF management still refuses to negotiate with Agrium.

It boils down to this. CF executives are refusing to do what the majority of its shareholders want. At the same time, they’re courting Terra shareholders to vote differently than Terra’s management is recommending.

Who will win in the end? We may know more Friday, or everything may become even less clear.

Watch this blog and siouxcityjournal.com for a report from the meeting. I’m particularly looking for Terra shareholders to talk to about their vote. Please email me at: davedreeszen@siouxcityjournal.com or call 712-293-4211.

Interesting read in Reuters focusing on the three chief executives involved in the three-way fight involving fertilizer manufacturers Terra Industries, CF Industries and Agrium, “Fertilizer war throws spotlight on CEOs.”

Here’s the key graph about Terra boss Mike Bennett, whom Reuters notes started at the Sioux City-based company as an operations technician at the Port Neal plant in 1973 and worked his way up the ladder to become CEO in 2001.

“He has earned a reputation as a strong operator and a consummate company man who is fiercely loyal to Sioux City.”

The story points out that Bennett and other senior Terra management face tough sledding at the company’s annual shareholders meeting on Nov. 20, where CF has nominated slate of candidates to replace three Terra-based directors.

A victory for the CF nominees would likely help the Deerfield, Ill.-based firm clinch a deal.

“This is a gritty management (at Terra) and they value their independence. And I think they’ve made an awful good case for continuing to be independent,” Charlie Rentschler, analyst at Wall Street Access, told Reuters.

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 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.

Terra Industries this morning reports a 60 percent percent drop in its second-quarter earnings, “Lower fertilizer demand pushes down profits.”

The Sioux City-based company blames continued weakness in the fertilizer industry, which has struggled with a glut of inventories and reduced demand in the current global economic slowdown.

Today’s release also shows that Terra’s efforts to fight off CF Industries’ takeover attempt have been a drag on its bottom line.

Read the company’s full reportterraearnings.pdf