Aug 10 2004
Terra Industries Inc. and Mississippi Chemical Corporation today announced that the two companies have reached a definitive agreement under which Terra will acquire all of the outstanding shares of Mississippi Chemical for an estimated total value of approximately $268 million. The transaction consideration will include cash and assumed debt of $161 million and stock of $107 million, and the final value will depend on Terra’s share price and closing adjustments. Both companies’ Boards of Directors have unanimously approved the transaction. The Official Committee of Unsecured Creditors in Mississippi Chemical’s bankruptcy case, Mississippi Chemical’s largest unsecured creditors and its debtor-in-possession secured lenders also support the transaction.
Mississippi Chemical and its domestic subsidiaries are currently operating under Chapter 11 of the U.S. Bankruptcy Code. As a result, the purchase agreement and related amended plan of reorganization are subject to approval by the U.S. Bankruptcy Court for the Southern District of Mississippi, as well as other regulatory approvals. Mississippi Chemical intends to file for Bankruptcy Court approval of the purchase agreement and related amended plan of reorganization by the end of August. Prior to the Terra acquisition and pursuant to the amended plan of reorganization, Mississippi Chemical’s nitrogen and phosphate businesses will be separated and the phosphate business will be either sold or transferred to the holders of Mississippi Chemical’s 7¼% senior notes and Mississippi Phosphates’ 5.8% industrial revenue bonds. After confirmation of the amended plan of reorganization, Terra will acquire all of the stock of Mississippi Chemical. The transaction is expected to be completed no later than the first quarter of 2005.
Expected Benefits of the Transaction
Terra’s acquisition of Mississippi Chemical is expected to:
- Expand Terra’s product sourcing and distribution capabilities beyond its existing North American and U.K. operations by diversifying its asset base in Trinidad and the U.S.;
- Improve Terra’s business risk profile by strengthening Terra’s industrial nitrogen market position and increasing its sourcing from low-cost gas regions;
- Provide Terra with new growth opportunities through Mississippi Chemical’s terminal assets in Donaldsonville, La. and Houston, Tx.;
- Yield significant annual cost savings; and
- Be accretive to Terra’s earnings and cash flow per share in the first year after closing.
“This is an important step in our efforts to strengthen Terra’s asset base and position the company for the long-term,” said Michael L. Bennett, Terra’s President and Chief Executive Officer. “Expanding our nitrogen manufacturing capabilities and diversifying our natural gas sources have been two important Terra objectives. Mississippi Chemical’s 50% interest in the Point Lisas, Trinidad ammonia production facility will significantly enhance Terra’s flexibility by lowering production costs in a high natural gas price environment. Mississippi Chemical’s terminal assets in Donaldsonville and Houston provide Terra with access to new markets. We also expect the Yazoo City facility’s mix of upgraded products for agricultural and industrial markets to serve us well.
“This transaction creates a strong platform for improved efficiency and future growth,” added Mr. Bennett. “The addition of Mississippi Chemical expands Terra’s product sourcing and distribution capabilities and strengthens our industrial nitrogen market position. We are confident this transaction will enhance Terra’s earnings power throughout the nitrogen market cycle and deliver significant value to our shareholders.”
Coley Bailey, Chairman and Chief Executive Officer of Mississippi Chemical, said, “We are very pleased to have reached this agreement with Terra. This transaction is an important step forward in completing the company’s plan of reorganization. We believe that it maximizes the value of Mississippi Chemical for our creditors and stakeholders while affording them the unique opportunity to participate in the upside potential of the combined company.”
Mr. Bailey continued, “This transaction reflects the importance and quality of Mississippi Chemical’s people and our outstanding manufacturing capabilities. I thank our employees for their continuing hard work and dedication. We are all committed to completing the sale process as expeditiously as possible and ensuring a seamless transition.”
Terra expects the transaction to be accretive to its earnings and cash flow per share in the first year after closing under most reasonable natural gas cost scenarios and applying customary operating, sales and administrative practices for these types of businesses. Terra expects to realize significant annual cost savings through synergies in the areas of product sourcing, distribution, administration and sales. Terra expects to quantify these and other cost saving opportunities as it and Mississippi Chemical develop an integration plan to combine the two companies.
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