Buyout Bid Of Terra Industries Sucks!

Note: I wrote this article last Friday and somehow forgot to hit the publish button, my apologies.

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 positive’s 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.

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