CF Buyout Bid Grossly Undervalues Terra Industries

Terra Industries weighs $2.1B takeover bid: Financial News - Yahoo! Finance.

This bid by CF Industries (CF) sucks for Terra Industries (TRA) shareholders. I think the stock is grossly undervalued. I wrote here that TRA had a valuation problem when you look just at the company’s cash holdings and the value of their stake in Terra Nitrogen (TNH). The market values the non-TNH part of Terra’s business, which generates 70% of their revenues at less than zero.

I do see a couple of positives in this bid:

• First, it puts TRA in play and may end up pushing the stock back up to a reasonable level.

• Second, if the purchase does go through, shareholders will end up owning shares of CF, which is in the same industry.

This was a smart move by CF to try to pick up Terra’s assets on the cheap. Let us hope this bid starts a bidding war and the shares continue to appreciate.

Note: TRA is a component of this site’s hypothetical Opportunities Portfolio.

Comments

[legmaker:]

Tim, good insite into the subject. I believe there is a misunderstanding with respect to TRA's business. They were bid down like any other nitrogen business, when theirs is worth much more do to higher margins. Either way you are right and these companies were good apart, but now they look fantastic together. CF has well positioned themselves for this takeover.

Jan 21 08:52 AM

[jimmy46:]

TRA stockholders will own 43% of the new company.

How much do you think they should get???

This isn't a cash buyout.

Jan 21 12:56 PM

[johnny1950:]

How woud the proposed deal affect the terra dividend ?

Jan 26 03:09 PM

[english major:]

Dude, where did you learn English? Your post shows total ignorance of your language, so why should your comments be taken seriously?


On Jan 21 08:52 AM legmaker wrote:

> Tim, good insite into the subject. I believe there is a misunderstanding
> with respect to TRA's business. They were bid down like any other
> nitrogen business, when theirs is worth much more do to higher margins.
> Either way you are right and these companies were good apart, but
> now they look fantastic together. CF has well positioned themselves
> for this takeover.

Jan 27 07:47 AM

[legmaker:]

Sorry you didn't like my post english major, just thought Tim did a nice job. God Bless.


On Jan 27 07:47 AM english major wrote:

> Dude, where did you learn English? Your post shows total ignorance
> of your language, so why should your comments be taken seriously?
>

Feb 05 12:51 AM

[legmaker:]

One more question english major, did you like the article and what is your position with respect to CF's move on TRA? God Bless.


On Jan 27 07:47 AM english major wrote:

> Dude, where did you learn English? Your post shows total ignorance
> of your language, so why should your comments be taken seriously?
>

Feb 05 12:53 AM