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Terra Buying Misschem

Deal will strengthen fertilizer maker in several nitrogen derivatives

by Alexander H. Tullo
August 16, 2004 | A version of this story appeared in Volume 82, Issue 33

In a deal combining fertilizer producers, Terra Industries has agreed to buy the bankrupt Mississippi Chemical for roughly $270 million.

Terra will offer about $110 million of its stock as well as make cash payments and assume debt totaling $160 million. The deal must be approved by federal bankruptcy court and other regulators.

Included in the transaction will be MissChem's 50% interest in Point Lisas Nitrogen, a joint venture with Koch Industries in Trinidad that has capacity to make 715,000 tons per year of ammonia from low-cost natural gas. MissChem also makes nitrogen products in Yazoo City, Miss., and Donaldsonville, La., and has terminal assets in Houston and Donaldsonville.

"Expanding our nitrogen manufacturing capabilities and diversifying our natural gas sources have been two important Terra objectives," Terra CEO Michael L. Bennett says. MissChem's phosphate fertilizer business will be separated from its nitrogen operations and sold off separately or transferred to its bondholders. Successful separation of the business is one of the conditions for Terra's acquisition of MissChem.

In the fiscal year ending on June 30, MissChem posted $337 million in sales, not including the $64 million in sales generated by its half of the partnership in Trinidad.

Ken Nyiri, a nitrogen fertilizer analyst for British Sulphur Consultants, says the deal will strengthen Terra's leading 36% share of the 12 million-ton-per-year U.S. market for urea ammonium nitrate fertilizer solutions. The deal will bring Terra into ammonium nitrate in the U.S., giving it MissChem's 41% share of the 2.2 million-ton fertilizer-grade market. In ammonia, the deal will give Terra the leading 23% share of a 14.5 million-ton market.

Nyiri says the purchase is positive in that it will consolidate a market that faces high feedstock costs and plant closures. Tough times in the U.S. agricultural sector and volatile natural gas prices drove MissChem to file for Chapter 11 bankruptcy reorganization in May 2003.



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