Yara International Exits The Takeover Battle For Terra Industries (TRA)

Norwegian company Yara International (ADR) (OTC: YARIY) has exited the takeover battle for Terra Industries, Inc. (NYSE: TRA).

Yara had announced last month that it would buy Terra Industries for $4.1 billion. The acquisition would have created the world’s biggest mineral fertilizer producer, and boosted Yara’s presence in U.S. However, Terra announced on Wednesday that it was planning to accept a $4.68 billion takeover offer from CF Industries Holding, Inc. (NYSE: CF) unless Yara raised its offer. Yara’s management has decided to stay away from a bidding war.

The news had a positive impact on Yara’s shares, which rose 5.6% in Oslo, as investors viewed the company’s backing off from an overseas M&A battle as a move that would preserve shareholder value.

Yara’s CEO, Jorgen Ole Haslestad said, “Terra would be a perfect fit to Yara and attractive at our proposed valuation, but we will not increase our offer that was first accepted by the Terra board.” Haslestad also said, “The U.S. remains an attractive market for us and we will continue to search for opportunities to grow our business in the region.”

With Yara backing off, CF Industries has come closer to acquiring Terra, especially after the announcement by Agrium, Inc. (NYSE: AGU) on Thursday that it will terminate its $5.4 billion offer to takeover CF Industries, later this month. Agrium, Inc. had first approached CF Industries with a takeover offer in February 2009.

The fertilizer sector, which saw a sharp decline in prices due to economic downturn, continues to remain in investors’ sight due to ongoing M&A activities in the sector.