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TERRA TO PURCHASE CANADIAN NITROGEN PRODUCTION ASSETS FROM AGRIUM
Oct. 19, 2009
Source: Terra Industries news release
Terra Industries Inc. ("Terra") (NYSE: TRA) announced today that it has signed an agreement to purchase a 50% interest in Agrium Inc.'s ("Agrium") (TSX and NYSE: AGU) Carseland, Alberta, Canada nitrogen production assets and certain U.S. assets for a purchase price of approximately US$250 million. The Carseland facility has the capacity to produce approximately 590,000 short tons of gross ammonia and approximately 750,000 short tons of granular urea per year.
The purchase would provide Terra with important financial and strategic benefits, including greater exposure to cost-advantaged natural gas, a more diverse geographic footprint in North America, and ownership in a facility that enables the manufacturing of upgraded ammonia-based products, consistent with Terra's long-term strategy.
On an as adjusted operating basis for the twelve-month period ending June 30, 2009, Terra estimates gross revenues for 50% ownership of the Carseland facility would have been approximately $125 million, operating income would have been approximately $33 million, and depreciation and amortization would have been approximately $16 million. The foregoing estimates were derived by Terra's management by applying certain adjustments and assumptions to underlying financial data provided to Terra by Agrium. These include adjustments to annual and quarterly data to derive data for the twelve-month period ended June 30, 2009 and adjustments regarding anticipated cost allocations. Terra cannot make any assurances, however, that these assumptions and adjustments accurately reflect actual historical operating results or will be indicative of future performance. Terra also cannot make any assurances that the underlying data provided by Agrium is accurate and will not change.
"We are pleased with this opportunity to expand our portfolio of quality nitrogen fertilizer manufacturing assets," said Michael Bennett, Terra President and Chief Executive Officer. "The Carseland, Alberta facility has a prime inland location and is designed to upgrade much of its ammonia to the value-added product urea.
"Four of Terra's seven North American ammonia plants are currently supplied with natural gas in regions that are cost-advantaged to Henry Hub prices. This addition of nitrogen production capacity in western Canada would bring to Terra another North American gas source that has a long history of selling at a discount to key U.S. trading hubs."
Bennett continued, "This transaction is consistent with Terra's pure-play nitrogen strategy, which distinguishes Terra from its competitors. The transaction would be immediately accretive to Terra shareholders and we believe it is a solid opportunity to create shareholder value."
The closing of the acquisition is subject to certain closing conditions and contingencies, including Terra's raising of $600 million of debt capital and completion by Agrium of its proposed acquisition of CF Industries Holdings, Inc. (NYSE: CF).
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