Terra Industries's chief executive Michael Bennett needs to extra tread carefully if it is head off on the acquisition trail.

The US fertilizer group is right to identify in a letter to shareholders that there are better things it could do with its $1bn cash pile than sit on it.

But that doesn't justify blowing the lot on a shopping spree.

Good time 

Sure, it would be an excellent time for him to close a really advantageous deal, given that Terra is being stalked by CF Industries, its Illinois-based rival.

An eye-catching takeover would hinder CF in two ways.

First, it would give Terra investors more reason to stick by the group's standalone strategy.

Second, it would make Terra a bigger mouthful for CF, which is already tying itself in knots trying to seal an all-share deal and keep control of the merged company.

Credibility factor 

But Mr Bennett would need a watertight case.

He appears to have maintained relatively good relations with shareholders while CF chief executive Stephen Wilson has burned through investor goodwill by potentially denying them a vote on the Terra deal.

Indeed, more than 60% of CF investors voted for Mr Wilson to pursue an approach from Canada's Agrium, rather than continue his Terra quest.

But bad deal risks losing Mr Bennett this advantage, and may tempt his investors to wonder whether they are better off with Mr Wilson and his offer premium.

Value creation 

Money may be burning a hole in Mr Bennett's pocket. But he needs to think of something truly value creative to do with it if he is not to return it to Terra shareholders.

Bargains may be harder to find now that listed company valuations have rebounded so far.

Completing a poor deal would be far, far worse than doing none at all.