Terra Acquisition

9 Months Ended

Sep. 30, 2011

Terra Acquisition

Terra Acquisition

4.     Terra Acquisition

        In April of 2010, we completed the acquisition of Terra through the merger of Composite Merger Corporation, our indirect wholly-owned subsidiary (Composite), with and into Terra pursuant to the Agreement and Plan of Merger dated as of March 12, 2010 among CF Holdings, Composite and Terra (the Merger Agreement). As a result of the merger, Terra became an indirect wholly-owned subsidiary of the Company. The acquisition of Terra has made the Company a global leader in the nitrogen fertilizer industry, diversified our asset base and increased our geographic reach and operational efficiency, and significantly increased our scale and capital market presence.

        Pursuant to the terms and conditions of the Merger Agreement, each outstanding share of Terra common stock was converted into the right to receive $37.15 in cash and 0.0953 of a share of CF Holdings common stock pursuant to an exchange offer and second-step merger (the Merger). CF Holdings issued an aggregate of 9.5 million shares of its common stock with a fair value of $882 million and paid an aggregate of $3.2 billion in cash, net of $0.5 billion cash acquired, for 100% of Terra's common stock.

        We funded the cash requirements of the acquisition with cash on hand and with $1.75 billion of borrowings under a senior secured bridge facility and approximately $1.9 billion of borrowings under a senior secured term loan facility that provided for up to $2.0 billion of borrowings. On April 21, 2010, CF Holdings completed a public offering of approximately 12.9 million shares of common stock at $89.00 per share. The proceeds of $1.1 billion, net of underwriting discounts and customary fees, were used to repay a portion of the senior secured bridge facility. On April 23, 2010, CF Industries completed a public offering of senior notes in an aggregate principal amount of $1.6 billion. Approximately $645.2 million of the net proceeds of the offering were used to repay in full the remaining outstanding borrowings under the senior secured bridge facility. We used the remaining proceeds from the offering to repay approximately $864.2 million of the senior secured term loan facility. In May 2010, we redeemed Terra's 7.75% senior notes due 2019 for $744.5 million and recognized a $17 million loss on the early extinguishment of that debt. See Note 19—Financing Agreements, for further information regarding these financing arrangements.

        The following table summarizes the allocation of the $4.6 billion purchase price to the assets acquired and liabilities assumed from Terra on April 5, 2010. During the measurement period that ended on March 31, 2011, net adjustments of $31.9 million were made to the fair values of the assets acquired and liabilities assumed with a corresponding adjustment to goodwill. The allocation of the purchase price recorded in the second quarter of 2010, and the net adjustments, are shown below. Our Consolidated Balance Sheet at December 31, 2010 was retrospectively adjusted to reflect these adjustments as required by the accounting guidance for business combinations. No further adjustments have been made to the purchase price allocation since March 31, 2011.

		Initial Valuation		2010 Net Adjustments to Fair Value			December 31, 2010		2011 Net Adjustments to Fair Value			March 31, 2011
		(in millions)
Assets acquired and liabilities assumed on April 5, 2010
	Current assets	$	966.8	$	—		$	966.8	$	—		$	966.8
	Property, plant and equipment, net		3,095.9		—			3,095.9		16.7			3,112.6
	Investments in unconsolidated affiliates		921.5		(13.5	)		908.0		—			908.0
	Goodwill		2,095.5		(10.7	)		2,084.8		(21.2	)		2,063.6
	Other assets		85.2		—			85.2		—			85.2
	Total assets acquired	$	7,164.9	$	(24.2	)	$	7,140.7	$	(4.5	)	$	7,136.2
	Current liabilities		424.5		(34.3	)		390.2		2.0			392.2
	Long-term debt		740.5		—			740.5		—			740.5
	Deferred tax liabilities—noncurrent		928.2		8.4			936.6		(6.5	)		930.1
	Other liabilities		95.2		1.7			96.9		—			96.9
	Noncontrolling interests		373.2		—			373.2		—			373.2
	Total liabilities and noncontrolling interests assumed	$	2,561.6	$	(24.2	)	$	2,537.4	$	(4.5	)	$	2,532.9
Total net assets acquired		$	4,603.3	$	—		$	4,603.3	$	—		$	4,603.3