Linked In
News In
Linked In

You are viewing your 1 complimentary article.

Register now to receive full access.

Already registered?

Login | Join us now

Opinion: Terra needs to be extra careful on deals

Twitter Linkedin eCard

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.

By By Mike Verdin

Twitter Linkedin eCard
Related Stories

Evening markets: Soybean futures gain, cotton prices jump on US data

Initial USDA forecasts for crop supply and demand for 2018-19 lift soy and cotton prices, but are not so well received in the cotton market

Will protein prices fight back against fat in dairy markets?

Prices of fats remain elevated against protein values in dairy - at a time when the opposite is true in markets for oilseed products

Weekly grain market view from Europe, February 23

EU cold snap could damage crops... UK market prices in closure of Vivergo ethanol plant... Rising Russian wheat prices...

Evening markets: Argentine moisture slips up soymeal rally. But weather revives wheat

Meal futures dip, a little, for the first time in 12 sessions. But wheat futures gain, as drought spreads in Kansas, and cold reaches Europe
Home | About | RSS | Commodities | Companies | Markets | Legal disclaimer | Privacy policy | Contact

Our Brands: Comtell | Feedinfo | FGInsight

© 2017 and Agrimoney are trademarks of Agrimoney Ltd
Agrimoney is part of AgriBriefing Ltd
Agrimoney Ltd is registered in England & Wales. Registered number: 09239069