Terra Industries said it would return $750m of cash to shareholders as it unveiled a rejig of its balance sheet in the face of a hostile $3.7bn bid from rival CF Industries.

The US nitrogen specialist said it would make the handout through a special dividend paid in the fourth quarter of the year. The dividend would amount to about $7.50 a share, according to Agrimoney.com calculations.

"Terra's board is focused on delivering value to our shareholders, and the special dividend offers shareholders significant additional value for their investment," said the company's chief executive, Michael Bennett, said.

Deal plans 

However, he left the door open to potential acquisitions heralded earlier this month when the group said it was "exploring potential transactions".

The company said it planned to raise $600m through debt, as well as paying off up to $330m in existing bonds, which are not due to expire until 2017.

"The stabilisation in financial markets allows us to recalibrate our balance sheet while positioning Terra to continue to take advantage of opportunities to acquire assets," Mr Bennett said.

Terra is offering a 4.5% premium to holders of the 2017 bonds, which pay a coupon of 7.0%.

Cash hoards 

The revamp comes as Terra attempts to fight off an approach from CF which has proposed a $1bn cash payout to investors of the combined company, should its bid succeed.

Both companies are sitting on cash. Analysts had estimated that Terra would finish 2009 with $626m of cash, with CF's year-end hoard pegged at $733m.

The takeover battle looks likely to come to a head in November, when CF is attempting to use Terra's annual meeting as an opportunity to place three candidates on its target's board.

CF is itself fighting off a bid from Canada's Agrium.