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.

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.

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, 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.