Transaction Expands Terra's Position as a Leading Provider of Nitrogen
Products
Transaction to be Submitted to U.S. Bankruptcy Court for Approval
SIOUX CITY, Iowa and YAZOO CITY, Miss., Aug. 9 /PRNewswire-FirstCall/ --
Terra Industries Inc. (NYSE: TRA) and Mississippi Chemical Corporation
(OTC Bulletin Board: MSPIQ.OB) 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
71/4% 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.
Overview of Combined Terra-Mississippi Chemical
Mississippi Chemical owns a 50% interest in Point Lisas Nitrogen Limited
in The Republic of Trinidad and Tobago, which has the capacity to produce
annually 715,000 tons of ammonia from low-cost natural gas supplied under a
contract with the National Gas Company of Trinidad and Tobago. In the U.S.,
Mississippi Chemical produces nitrogen products at its Yazoo City, Miss. and
Donaldsonville, La. facilities and owns and operates a storage and
distribution terminal in Donaldsonville -- one of the northernmost points on
the Mississippi River capable of receiving ocean-going nitrogen vessels.
Mississippi Chemical also owns a 50% interest in an ammonia terminal located
near Houston, Tx. Production at the Donaldsonville facility is limited to one
anhydrous ammonia plant that operates on a swing basis to take advantage of
favorable relationships between natural gas costs and anhydrous ammonia prices.
The acquisition will increase Terra's annual production capacity for urea
ammonium nitrate solutions (UAN), anhydrous ammonia (AA) and ammonium nitrate
(AN) by 16%, 41% and 95%, respectively, making Terra the leading U.S. producer
of UAN, AA and AN, and the leading U.K. producer of AA and AN.
Upon completion of the transaction, Terra will have the capacity to
annually produce at its facilities (including the 50% interest in the Point
Lisas facility):
* 4.4 million tons of UAN, the most versatile nitrogen fertilizer in
North America;
* 4.8 million tons of AA, the basic ingredient for most nitrogen
fertilizers and many industrial products; and
* 2.0 million tons of AN, the nitrogen fertilizer preferred by most
British farmers and a popular nitrogen fertilizer source in the
southeastern U.S.
Of Terra's 4.8 million tons of AA production capacity, 8% will rely on
natural gas sources in Trinidad, 75% in North America and 17% in the U.K.
Terra is also one of the largest U.S. producers of methanol, an ingredient
in oxygenated fuels and a feedstock for other chemical processes.
Following is selected, unaudited financial information for the 12 months
ended June 30, 2004 for Terra and Mississippi Chemical's nitrogen segment.
The financial information concerning Mississippi Chemical does not reflect
charges for asset impairments or losses on sales of fixed assets.
Mississippi Chemical
(all figures in millions) Terra Domestic Trinidad (a)
Revenues $1,469.8 $337.2 (b) $63.7
Operating income $102.6 (c) $12.4 (d) $24.3
Depreciation & amortization $102.3 $13.3 $7.9
(a) Represents 50% of Point Lisas Nitrogen Limited's unaudited amounts.
At June 30, 2004, 50% of Point Lisas Nitrogen Limited had cash
balances of $41.5 million and total term debt of $46.7 million.
(b) Includes $32.2 million of ammonia sales to Mississippi Chemical's
phosphates business segment and revenue related to the resale of
ammonia purchased from Point Lisas Nitrogen Limited.
(c) Excludes $17.9 million of income from the recovery of product claim
costs.
(d) Domestic operating income excludes $21.8 million of equity income on
Mississippi Chemical's 50% interest in Point Lisas Nitrogen Limited.
Terms
Perry Principals Investments LLC, an affiliate of Perry Capital Management
Inc., and Citigroup Global Markets, Inc., an affiliate of Citigroup, have
entered into a commitment to extend the term of Mississippi Chemical's
debtor-in-possession term loan beyond Mississippi Chemical's emergence from
bankruptcy until four years from the closing of the transaction. Terra and
Mississippi Chemical will use existing cash on hand to reduce the principal
amount of this term loan to $125 million from $160 million and satisfy all
other cash payments to creditors required by the amended plan of
reorganization.
In addition, Terra would issue to certain of Mississippi Chemical's
unsecured creditors 14.75 million shares of Terra common stock and an amount
of preferred stock, subject to certain post-closing adjustments as specified
in the definitive agreement. Assuming the Closing Share Price as defined in
the definitive agreement is equal to $6.14, (Terra's closing share price on
Friday August 6, 2004, the last trading day prior to the announcement of the
agreement), Mississippi Chemical's unsecured creditors would receive Terra
common stock with a value of $90.6 million plus the preferred stock. The
preferred stock to be issued to unsecured creditors will initially be set with
a liquidation preference of $32.2 million. The projected working capital and
other closing adjustments are currently anticipated to total $17.4 million.
Under this projected scenario, Terra will issue preferred stock with a
liquidation preference of $14.8 million and, within ten months of closing,
Terra will have the option, but not the obligation, to redeem the preferred
stock for 2.4 million to 3.4 million shares of Terra common stock to be
determined based upon Terra's stock price at closing. Based upon a Closing
Share Price of $6.14 per share, Terra would have the right to redeem the
preferred stock for 2.4 million Terra common shares. The final amount of the
working capital and other post-closing adjustments will depend on various
factors including, but not limited to: business performance, commodity prices
and the terms of final separation of Mississippi Chemical's phosphate business.
The agreement also provides that Terra will issue 250,000 additional
shares of Terra common stock for distribution to Mississippi Chemical
shareholders. Under the amended plan of reorganization, Mississippi Chemical
expects that substantially all unsecured creditors with allowed claims of
$5,000 or less from the nitrogen business will be paid in cash, in full.
Substantially all other unsecured creditors with allowed claims from the
nitrogen business will be paid either cash equal to a specified percentage of
their allowed claim or a pro-rata share of the pool of Terra common and
preferred stock.
Anglo American
In a separate transaction, Anglo American plc (Nasdaq: AAUK), through a
wholly-owned subsidiary, has entered into an agreement to sell in a private
placement to an investor group led by Perry Capital 12.5 million of its shares
of Terra common stock for $67 million. Upon completion of this sale, Anglo
American will own approximately 25.1 million common shares of Terra,
representing 32% of Terra's outstanding shares. As previously announced,
Anglo American plans to dispose of its interest in Terra, with timing based on
market and other considerations.
Mr. Bennett said, "We are pleased to have Perry Capital and other leading
investors acquire over 12 million shares of Terra at the same time that we
announce this important strategic acquisition."
Conditions and Closing
The transaction is subject to U.S. Bankruptcy Court approval, successful
completion of the restructuring of Mississippi Chemical's nitrogen and
phosphate businesses, as well as customary regulatory approvals. The
transaction is also subject to Terra's ability to obtain the consent of
Terra's current working capital lenders.
The Terra acquisition will be the primary basis of Mississippi Chemical's
amended plan of reorganization. To facilitate Mississippi Chemical's exit
from bankruptcy as expeditiously as possible, however, the amended plan will
also provide that should the Terra transaction not be consummated, Mississippi
Chemical would emerge from bankruptcy on a standalone basis with secured
financing provided by an existing commitment from Citigroup and Perry Capital.
Under the standalone alternative, Mississippi Chemical's debtor-in-possession
financing would be retired, the same cash distributions would be made to
holders of allowed unsecured claims as in the Terra transaction, Mississippi
Chemical's other unsecured creditors would receive substantially all of the
common shares of the reorganized Mississippi Chemical, and Mississippi
Chemical's current shareholders would receive warrants to acquire common
shares in the reorganized company.
Lazard LLC is serving as financial advisor to Terra. Kirkland & Ellis LLP
is serving as legal advisor to Terra. Mississippi Chemical is being advised
by Gordian Group LLC as its financial advisor, Glass & Associates, Inc., as
its restructuring advisor, Vinson & Elkins LLP as its corporate counsel, and
Phelps Dunbar LLP as its bankruptcy counsel. The Official Committee of
Unsecured Creditors in Mississippi Chemical's bankruptcy case is being advised
by Chanin Capital Partners as its financial advisor and Orrick, Herrington &
Sutcliffe LLP as its legal counsel.
Conference Call and Webcast
Terra management will conduct a conference call to discuss the transaction
today, August 9, 2004, at 9:00 a.m. Central Time (10:00 a.m. Eastern Time).
The conference call will be webcast live from Terra's web site at
http://www.terraindustries.com.
About Mississippi Chemical
Mississippi Chemical Corporation is a leading North American producer of
nitrogen products used as crop nutrients and in industrial applications.
Production facilities are located in Mississippi, Louisiana, and through Point
Lisas Nitrogen Limited, in The Republic of Trinidad and Tobago. Additional
information is available on Mississippi Chemical's web site,
http://www.misschem.com.
About Terra
Terra Industries Inc., with 2003 revenues of $1.4 billion, is a leading
international producer of nitrogen products. Headquartered in Sioux City,
Iowa, Terra employs approximately 1,050 people in North America and the United
Kingdom. Terra's NYSE ticker symbol is TRA. Additional information is
available on Terra's web site, http://www.terraindustries.com.
Except for the historical statements and discussion contained herein,
statements set forth in this news release constitute "forward-looking
statements." These forward-looking statements rely on a number of assumptions
concerning future events, risks, and other uncertainties that are beyond
Terra's and Mississippi Chemical's ability to control. Readers are cautioned
that a number of factors could cause actual results to differ materially from
the forward-looking statements, including without limitation: (i) the ability
of Mississippi Chemical to operate pursuant to the terms of the debtor-in-
possession revolving and term loan financing facilities, (ii) operating
constraints, costs and uncertainties associated with the bankruptcy
proceedings, (iii) the ability of Mississippi Chemical to confirm and
consummate the amended plan of reorganization and to satisfy the closing
conditions under the Terra Agreement or the exit financing commitment, (iv)
the ability of Mississippi Chemical to receive trade credit, (v) the ability
of Mississippi Chemical to maintain contracts that are critical to its
operations, (vi) changes in matters which affect the global supply and demand
of fertilizer products and industrial chemicals, (vii) high natural gas prices
and the volatility of the natural gas market, (viii) a variety of conditions
in the agricultural industry such as grain prices, planted acreage, projected
grain stocks, U.S. government policies, weather, and changes in agricultural
production methods, (ix) possible unscheduled plant outages and other
operating difficulties, (x) price competition and capacity expansions and
reductions from both domestic and international competitors, (xi) foreign
government agricultural policies (in particular, the policies of the
governments of India and China regarding fertilizer imports), (xii) the
relative unpredictability of international and local economic conditions,
(xiii) the relative value of the U.S. dollar, (xiv) regulations regarding the
environment and the sale and transportation of fertilizer products, (xv) oil
costs and the impact of war in the Middle East, (xvi) the occurrence of any
national calamity or crisis, including an act of terrorism, (xvii) the
continuing efficacy of unfair trade remedies, and the outcome of pending
unfair trade remedy (antidumping) cases, (xviii) the companies' ability to
retain key employees, and (xix) other important factors affecting the
fertilizer industry and the companies as detailed under the heading "Certain
Business Factors" and elsewhere in Terra's and Mississippi Chemical's most
recent Annual Reports on Form 10-K, which are on file with the Securities and
Exchange Commission.
SOURCE Terra Industries Inc.; Mississippi Chemical Corporation
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Related links:
http://www.terraindustries.com
http://www.misschem.com
Company News On-Call:
http://www.prnewswire.com/comp/437906.html
CONTACT:
Mark Rosenbury, +1-712-279-8756, for Terra;
or Keith Johnson, +1-662-746-4131, for Mississippi Chemical
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