TRA Terra Industries Nov 2009 Presentation

8/14/2019 TRA Terra Industries Nov 2009 Presentation

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2

Important

Information

and

Where

to

Find

It

OnOctober13,2009,TerrafiledwiththeSecuritiesandExchangeCommission(theSEC)adefinitiveproxystatementinconnectionwithits2009AnnualMeeting,andismailingthedefinitiveproxystatementtoitsshareholders.Investorsandsecurityholdersareurgedtoreadthedefinitiveproxystatementrelatingtothe2009AnnualMeetingandanyotherrelevantdocumentsfiledwiththeSEC(whenavailable),becausetheycontainimportantinformation.InvestorsandsecurityholdersmayobtainafreecopyofthedefinitiveproxystatementandotherdocumentsthatTerrafileswiththeSEC(whenavailable)atthe

SECs

Web

site

at

www.sec.gov

and

Terras

Web

site

at

www.terraindustries.com.

In

addition,

the

definitive

proxy

statementandotherdocumentsfiledbyTerrawiththeSEC(whenavailable)maybeobtainedfromTerrafreeofchargebydirectingarequesttoTerraIndustriesInc.,Attn:InvestorRelations,TerraIndustriesInc.,600FourthStreet,P.O.Box6000,SiouxCity,IA511026000.

CertainInformationConcerningParticipants

Terra,itsdirectors,executiveofficersandcertainemployeesspecifiedinAnnexAtoTerrasdefinitiveproxystatementforthe2009AnnualMeeting,whichwasfiledwiththeSEConOctober13, 2009,areparticipantsinthesolicitationofTerrassecurityholdersinconnectionwithits2009AnnualMeeting.Securityholdersmayobtaininformationregardingthenames,affiliationsandinterestsofsuchindividualsinTerrasAnnualReportonForm10KfortheyearendedDecember31,2008,whichwasfiledwiththeSEConFebruary27,2009andamendedonApril28, 2009,anditsdefinitiveproxystatementforthe2009AnnualMeeting.TotheextentholdingsofTerrasecuritieshavechanged sincetheamountsprintedinthedefinitiveproxystatementfor

the

2009

Annual

Meeting,

such

changes

have

been

or

will

be

reflected

on

Statements

of

Change

in

Ownership

on

Form

4

filedwiththeSEC.Thesedocuments(whenavailable)maybeobtainedfreeofchargefromtheSECsWebsiteatwww.sec.govandTerrasWebsiteatwww.terraindustries.com.

Importantadditionalinformation


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Executivesummary

Terrais

astrong

investment

proposition

with

arobust

near

term

outlookandsolidlongtermprospects

CF

/

Terra

combination

lacks

compelling

strategic

rationale

CFsproposalisinadequateandopportunistic

TerrashighlyqualifiedandindependentBoardisfocusedondeliveringshareholdervalue


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Title

SubTitle

TerraIndustries

Inc.

Supplying

Industry CleaningtheAir FeedingtheWorld

4

Terraisastronginvestment

proposition


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Terraisastronginvestmentpropositionwitharobustneartermoutlookandsolidlongtermprospects

Theleadingpureplaynitrogencompany

Uniquelypositionedtoservedieselexhaustfluid(DEF)customers

Strongnitrogenindustryfundamentals;wellpositionedtocapturegrowth

UreaAmmonium

Nitrate

(UAN)

commands

apremium;

strong

upside

for

industrial

sector

nitrogen

ExpectedincreaseinU.S.naturalgassuppliescouldtransformtheNorthAmericannitrogenindustry


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StrongnitrogenindustryfundamentalsAgriculturalbusinessisprojectedtogrowoverthenext10years

Nitrogenis

required

each

year

to

fertilize

crops,

unlike

phosphate

and

potash

whoseapplicationcanbediscretionary

Nitrogenconsumptionisexpectedtoberobust,drivenbyplanted acresofcorn

PlantedacresofcornintheUnitedStates(acresinmillions)

86.0

87.0

89.0

90.090.5

83

84

85

86

87

88

89

90

91

2008/09E 2009/10E 2010/11E 2014/15E 2018/19E

Plantedacres

(millions)

Source: USDA.


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WellpositionedtocapturegrowthIncreasedproductiontoUAN,ahighgrowth,flexibleproduct

ExpandingWoodwardfacilityUANcapacityfrom300,000tonsto825,000tons

PositionsTerratotakeadvantageofcontinuedgrowthinUAN

UANhasbeenamongthefastest

growingnitrogen

products

in

North

America

TerraEnvironmentalTechnologiesisfocusedonliquidureasalesintothe

fastgrowing

environmental

sector80

90

100

110

120

130

140

150

160

170

2003 2005 2007 2009E 2011E 2013E 2015E

UAN Urea

IndexedNorthAmericanUrea&UANVolume(2003=100)(fertilizerconsumption+exports)

Source: Fertecon.


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UANcommandsapremium

GreenMarkets MidCornbelt($perlbN)

$0.10

$0.20

$0.30

$0.40

$0.50

$0.60

$0.70

$0.80

$0.90

Mar-00 Aug-01 Dec-02 Apr-04 Sep-05 Jan-07 May-08 Sep-09

UAN Urea Ammonia

Source: GreenMarkets.

ChinaraisesexporttariffonUreato135%

StrongdemandfromIndiaandPakistan

tightensglobalsupply

Abnormaltradingactivityandunusualexportsprovokedby

ongoingdelaysinU.S.harvest/inventoryrestocking

TerrawillprofitastheUANpremiumreturnsin2010andbeyond


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StrongupsideforindustrialsectornitrogenGrowingenvironmentalandstablemarginindustrialbusinesses

Growthdrivenbyincreasedemissionreductionrequirements

Environmentaltechnologies

LeaderinNOxabatementreagents

TheleadingNorthAmericanDEFproducer

DedicatedDEFproductioncapacity

Dedicatedtechnicalteam

Fullsupplychainoversight

Stablemarginbusiness

Industrialchemicals

LeadingNorthAmericanproducerofammoniaandderivativessuchas:

Ammoniumnitrateasablastingproductforminingapplications

NitricAcidasarawmaterialfornylonfibers,polyurethanefoams,specialtyfibers,andothernitrogenproducts


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ExpectedincreaseinU.S.naturalgassuppliescouldtransformtheNorthAmericannitrogenindustry

CERA Historicalandprojectedgasprices($/mmbtu)

$2.00

$4.00

$6.00

$8.00

$10.00

$12.00

$14.00

$16.00

Jan05 Jan08 Jan11 Jan14 Jan17 Jan20

Source: HISCambridgeEnergyResearchAssociates;PlattsGasDailyhistoricaldata.


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Recentdevelopments OnSeptember24,2009,Terraannouncedthatitintendstoreturn cashtoits

shareholders

through

a

special

cash

dividend

of

$7.50

per

share

(~$750

million) AnnounceddeclarationofdividendonOctober29,2009;dividendwillbepaidonDecember

11,2009toshareholdersofrecordasofNovember23,2009

OnOctober19,2009,Terraannouncedthatithadsignedanagreementtoacquirea50%interestinAgriumInc.sCarseland,Alberta,Canadanitrogenproductionassets

andcertain

U.S.

assets

for

approximately

$250

million

Highqualityfacility:lowgascosts;attractiveproductpricing

Increasesexposuretomanufacturingofupgradedammoniabasedproducts

Capacitytoproduceapproximately590,000shorttonsofammoniaandapproximately

750,000short

tons

of

granular

urea

per

year

Attractivevaluation uniqueopportunity

ExpectedtobeimmediatelyaccretivetoTerrasshareholders

Transactionsubjecttocertainconditionsandcontingencies,includingAgriumscompletionofitsproposedacquisitionofCF

OnOctober26,2009,TerraCapital,Inc.announcedtheclosingofitsprivateofferingof$600millionaggregateprincipalamountof7.75%SeniorNotes due2019

UseofproceedstoredeemexistingSeniorNotesdue2017,fundspecialcashdividendpaymentandfundCarselandacquisition

Successful,over2xoversubscribedoffering

MoreflexiblecovenantpackagerelativetothepriorSeniorNotesdue2017


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Title

SubTitle

TerraIndustries

Inc.

SupplyingIndustry CleaningtheAir FeedingtheWorld

14

CF/Terracombinationlacks

compellingstrategic

rationale


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15

CF/Terracombinationlackscompellingstrategicrationale

Terrashareholders

would

own

approximately

17%

of

the

pro

forma

company

Terraisuniquelypositionedtoobtainsellingpricepremiumsandadvantagedcostgas

CFlacksmeaningfulscaleinphosphatefertilizer

CF

has

a

mixed

track

record

with

new

ventures

and

strategic

direction

is

inconsistent

Increasedphosphate(DAP)supplygoingforwardisexpectedtodecreaseprices

CFsphosphatesegmenthasbenefittedfromatemporaryprofitspike

TerrahasconsistentlyexpressedthelackofstrategiclogicoftheCF/Terratransaction


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TerrahasconsistentlyexpressedthelackofstrategiclogicoftheCF/Terratransaction

CFandTerrahaveenteredintomanydiscussionsoverthecourseoftheirhistoryregardingacombination

Eachtime,TerrahasdeterminedthatacombinationwithCFdoesnotmakestrategicsenseandisnotbeneficialtoTerrashareholders

In2004,TerradecidedtopursuetheacquisitionofMississippiChemicalinstead

In2007,CFinitiateddiscussionswithTerra,whichTerradecidednottopursue

Terrahasconcludedthattheindustrialandstrategiclogicofa combinationwithCFhas

notbeen

compelling

at

any

time

and

the

value

proposition

was

insufficient

to

merit

furtherdiscussions


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Ammonia

Agricultural

15%

Other

3%

UAN

48%

Urea

4%

AmmoniumNitrate

11%

Ammonia

Industrial

19%

UAN

30%

Ammonia

Agricultural

23%

Urea

47%

Agricultural

71%

Industrial

29%

Agricultural

100%

Terraisaleadingpureplayproducerofnitrogenfertilizer

Upgradessignificantportionofammoniacapacitytohighervalue

addedproducts

Focusesonhighermarginproductsvs.ammoniaandurea

Servesbothagricultureandmore

stable

industrial

customers

TerrasmorestableandhighermarginproductportfoliowouldbedilutedbyatransactionwithCF

ShiftsTerrasbusinessfocusaway

fromhigh

growth

UAN

and

ammoniumnitratetowardsureaandammonia

ReducesTerrasdiversificationandincreasesexposuretoagricultural

cyclicality

2008revenuebyproductmix

2008revenuebycustomermix

2008revenue:

$2,891

million

Source: Terramanagement andCFfilings.

Terra CFNitrogen

2008nitrogen

revenue:

$2,591

million

Terrashareholderswouldownapproximately17%oftheproformacompany


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TrinidadandTobagoandUnitedKingdom

TerrasproductionfacilitiesareideallylocatedtoservetheCornbelt

NaturalgasatbasisadvantagetoHenryHub

Terra

has

deliberately

located

its

coremanufacturingassetsawayfromtheU.S.GulfCoast,whereimportcompetitionismostsevere

65%ofTerrastotalNorthAmericanammoniaproductionvolumeis

locatedinland

or

in

gas

advantaged

regionsvs.CFs27%

AveragepremiumforUANforMidContinentvs.Gulfpricingwas$39pertonfromJanuary1,2004to

September30,

2009

Source: Terramanagement,CFfilingsandFertecon.

Notes: Shadedstates

indicate

the

Cornbelt.

ThepercentageofTerrastotalammoniaproductionvolumelocatedinlandoringasadvantagedcountriesincludestheproposedCarselandjointventure.

TerraProduction CF

Nitrogen

Production

Terraisuniquelypositionedtoobtainsellingpricepremiumsandadvantagedcostgas


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J.R.Simplot

Company8%

Other7%

PotashCorp 24%

CF10%

Agrium7%

Mosaic44%PotashCorp5%

Ammophos2%

OCFL2%

CF2%

GCT3%

OCP7%

Mosaic9%

Other70%

Domesticphosphateconsumptionhasremainedflatoverthepast10years(19992008CAGR:0.6%)(1)

U.S.phosphatemarketreliesonexportstoremainprofitable

Significantvolatilityinsulfurandphosphaterockpricing

CFlacksmeaningfulscaleinphosphatefertilizer

Globalphosphoricacidcapacity

Source: IFDC Worldwide Phosphoric Acid Capacity Listing by Plant, Sep. 2009.(1) USDA.

NorthAmericanphosphoricacidcapacity

Witha2%shareofglobalcapacity,CFlacksthescaletoremain asignificantplayerinthephosphatemarket


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h d k d h d


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Perunitrogen

complex

CFispursuingahighlycapitalintensivePeruprojectwhoseeconomicsareunknownandwhose

financing

is

uncertain

CF'sPeruinvestmentisfraughtwithexecutionriskandofquestionablevalue,evenifeventuallydeveloped

AlthoughCFmanagementhasstatedtheybelievetheprojecthas$69/shareofNPV,theywillbemakingagonogodecisionbytheendof2009despitehavingalreadyincurred$25.7millioninprojectdevelopmentcostsin2009

Expecttoincuranadditionalchargeof$10 $11millionindevelopmentcostsrelatedtoPeru

project

in

Q4 Highlyspeculative50%financinginachallengingprojectfinancingenvironment

CFhasamixedtrackrecordwithnewventuresandstrategicdirectionisinconsistent

Potash

Afailedventure

CFphosphate

gross

margin

was

negatively

affected

by

higher

input

costs

and

by

potash

inventory

writedownsinQ42008,Q12009andQ22009

Approximately$56millionintotalwritedowns

CFsresponse:

Werefinishedwithpotash.Wedneversayneverinanybusiness.CFhasbeeninthepotashbusinessbefore,butobviouslythisbeforeitbecameapubliccompany.Anditwasverysuccessfulatthetime,I

understand,

although

I

didnt

have

personal

experience

with

it.

Obviously,

the

strategy

we

tried

to

implementandexecuteassociatedwiththispotashwasilltimedandultimatelynotsuccessfulanditwasamistakeweplannottorepeat.

AnthonyNocchiero,CFsCFOSeptember16,2009

CFpubliclyindicateditsDonaldsonvilleplant,withitsMississippiRiverlocation,alsobenefitsfromamakeversusbuy capability,replacingoraugmentingproductionwithimportedproductwheneconomicsjustifyit (1)

However,unlikeTerra,whereDonaldsonvilleisoneofmanyfacilities,DonaldsonvilleisCFsonlywhollyownednitrogenproductionflagshipasset

Donaldsonville Consideredaswingplant

(1) CFsMay20,2009investorpresentation.


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Title

SubTitle

TerraIndustries

Inc.


23

CFsproposalisinadequate

andopportunistic

CF l i i d t d t i ti


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CFsproposalisopportunisticandthepremiumisillusory

TerrashareholdersarenotreceivingadequatecompensationforthevalueofCFsestimatedsynergies

CFsproposalvaluesTerraatasignificantlylower2010EEBITDAmultiplecomparedtocurrentpeertradingandprecedentfertilizertransactionmultiples

CFcansignificantlyincreaseitsproposalwhilemaintaininganaccretivetransaction

CF l i t i ti


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0.2500x

0.3000x

0.3500x

0.4000x

0.4500x

0.5000x

0.5500x

8/11/05 3/7/06 10/2/06 4/29/07 11/24/07 6/20/08 1/15/09

$0

$250

$500

$750

$1,000

$1,250

$1,500

Exchangeratio DAPphosphateprice

CFsproposalisopportunistic

Source: FactSetandFertecon.(1) DAPpricereportedmonthlyandbasedonU.S.Gulf bulkFOB.

(1)

Dailyexchangeratio MonthlyU.S.DAPpricing($/tonne)

CFchosethemostfavorabletimeinitspublichistorytoseektoacquireTerra,fromanexchangeratiostandpoint

CFs proposal is opportunistic (contd)


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$0.20

$0.40

$0.60

$0.80

Mar-00 Aug-01 Dec-02 Apr-04 Sep-05 Jan-07 May-08 Sep-09UAN Urea Ammonia

CF sproposalisopportunistic(cont d)

Strongnitrogenindustryfundamentals

Agricultural

business

is

projected

to

grow

over

the

next

10

years Nitrogen is required each year to fertilize crops, unlike phosphate and potash

whose application can be discretionary

Wellpositionedtocapturegrowth

Increased

production

to

UAN,

a

high

growth,

flexible

product

UANcommandsapremium CERAHistoricalandprojectedgaspricing

PlantedacresofcornintheUnitedStates(acresinmillions)

86.0

87.0

89.090.0

90.5

82

84

86

88

90

92

2008/09E 2009/10E 2010/11E 2014/15E 2018/19E

Plantedacres

(millions)

Source: USDA.

80

100

120

140

160

2003 2006 2009E 2012E 2015E

UAN Urea

IndexedNorthAmericanUrea&UANVolume(2003=100)(fertilizerconsumption+exports)

ExpandingWoodwardfacilityUANcapacityfrom300,000tonsto825,000tons

PositionsTerratotakeadvantageofcontinuedgrowthinUAN

UANhasbeenamongthefastest

growing

nitrogen

products

in

North

America

TerraEnvironmentalTechnologiesisfocusedonliquidureasalesintothefastgrowingenvironmentalsector

Source: Fertecon.

GreenMarkets MidCornbelt($perlbN) Chinaraisesexporttariffon

Ureato135%

StrongdemandfromIndiaandPakistantightensglobalsupply

Abnormaltradingactivityandunusualexportsprovokedbyongoingdelaysin

U.S.harvest/inventoryrestocking

Source: GreenMarkets. Source: HISCambridgeEnergyResearchAssociates;PlattsGasDailyhistoricaldata.

$0

$2

$4

$6

$8

$10

$12

$14

$16

Jan05 Jan08 Jan11 Jan14 Jan17 Jan20

CFs proposal premium is illusory


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61%

41%

28%

13%

7% 6%

Allcashtransactions

sinceLehmanfiling

Unsolicitedtransactions CFproposalnominal

premium

Fertilizerpeersmultiple

approach

Nitrogenpeersmultiple

approach

Historicaltrading

multipleapproach

CF sproposalpremiumisillusory

Source: SDCPlatinum,CFinvestorpresentationasof4/15/09.(1) IncludesclosedandpendingtransactionsfromSeptember15,2008 toNovember3,2009withU.S.targetsover$1billion. Allcashtransactionsincludedealswitha99%orgreatercashconsideration. Excludes

distressedtransactions.

Premium

based

upon

1day

prior

to

initial

announcement.

(2) IncludesclosedandpendingtransactionsfromJanuary1,2004to November3,2009withU.S.targetsover$1billion. UnsolicitedtransactionsincludeallsituationsasdefinedbySDCinwhich thetarget'sreactiontotheacquireruponinitialdisclosureofofferpriceiscategorizedasunsolicitedorhostile. Includesbothstockandcashtransactions. Premiumbasedupon1daypriortoinitialannouncement.

(3) CFsproposalbasedon$32.00pershare,0.1034xexchangeratio,andCFpriceof$83.25asof10/30/09. PremiumbasedonTerrasharepriceof$31.77asof10/30/09.

(1) (3)

(2)

Premiumto1dayTargets preannouncementclosingprice

PremiumtoTerrastheoreticalunaffectedsharepricesbasedon

historicaltrading

Thehighpremiumsinrecenttransactionsinvolvingcashreflectthepremiumsrequiredtocashoutinvestorsatthislowpointintheeconomiccycle.

CF

investor

presentationApril15,2009

CFs proposal values Terra at a significantly lower


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9.8x9.3x

8.3x7.7x 7.7x

5.9x

5.1x4.7x

8.4x

8.9x

3.0x

6.0x

9.0x

12.0x

PotashCorp Intrepid

Potash

ICL Yara K+S Incitec Pivot Mosaic Agrium Terra at

CF's latest

proposal

CF

(1)

(2)

CF sproposalvaluesTerraatasignificantlylower2010EEBITDAmultiplecomparedtopeers

Source: Publicfilings,FactSet.Note: Multiplesasof10/30/09andbasedonIBESconsensus.(1) BasedonTerrasenterprisevalueof$3,540mmperpage5ofCFsinvestorpresentationfiled11/4/09andTerras2010estimatedEBITDAof$694mm,perTerramanagement.

(2) Basedon

page

5of

CFs

investor

presentation

filed

11/4/09.

EV/2010EEBITDA

Precedent fertilizer transactions per CFs investor


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PrecedentfertilizertransactionsperCF sinvestorpresentation

Source: CFinvestorpresentationfiled11/4/09.

ThemeanNTMEBITDAmultipleofthethreerelevantcompletedprecedentfertilizer

transactions,as

quoted

by

CF,

is

7.6x

Priortothisyear,therewereonly

3relevant

precedent

transactions

intheglobalfertilizersectorthisdecade.Allothersectortransactionswereeitherverysmallorinvolvedbankruptcompanies

CFinvestorpresentation

November4,

2009

result in a significantly higher proposal price per


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resultinasignificantlyhigherproposalpricepershareforTerra

Source: CFinvestorpresentationfiled11/4/09.Note: EnterprisevalueadjustmentsandsharecountbasedonCFsinvestorpresentationfiled11/4/09.

BasedonthemultiplessuggestedinCFsinvestorpresentation,theimpliedpersharevalueforTerra,usingTerraManagementsestimated2010EBITDA,is

significantlyhigher

than

CFs

current

proposal

CFproposal2010EEBITDAmultiple 6.7x

Terra2010EEBITDA $694

Implied

enterprise

value $4,650

()Debt ($600)

(+)Cash 1,198

()Customerdeposits (41)

Impliedequityvalue $5,207

Dilutedsharesoutstanding 101

Implied

per

share

value $51.55

Asstated

by

CF,

the

proposal

EV/2010E

EBITDA

multiple

is

6.7x

and

the

average

EV/NTM

EBITDA

multipleforprecedentfertilizertransactionsis7.6x

ApplyingthesemultiplestoTerrasestimated2010EBITDAimpliesvaluessignificantlyhigherthan CFscurrentproposal

Impliedshare

price

based

on

CF

proposal

2010E

multiple

Precedentfertilizertransactions'NTM

EBITDAmultiple 7.6x

Terra2010EEBITDA $694

Implied

enterprise

value $5,274

()Debt ($600)

(+)Cash 1,198

()Customerdeposits (41)

Impliedequityvalue $5,831

Dilutedsharesoutstanding 101

Implied

per

share

value $57.74

Impliedsharepricebasedonaverageprecedent

fertilizertransactions NTM

multiple


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CF can significantly increase its proposal while


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32


CFhasstatedthatthetransactionissignificantlyaccretivetoCFstockholders

Based

on

CFs

current

proposal

and

Terras

2010E

EBITDA

estimate

of

$694

million,thetransactionisestimatedtobeover55%accretive(1) toCFsEPS

Terracalculatesthatevenat$58pershareprice,thetransactionwouldstillbeover20%accretive(1)

ThereissignificantadditionaldebtcapacityavailabletoCF

(1) Basedonmidpoint$120mmrunrateannualsynergies.

CFs proposal is inadequate and opportunistic


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CF sproposalisinadequateandopportunistic

CFsproposal

is

opportunistic

and

the

premium

is

illusory

CFsproposalvaluesTerraatasignificantlylower2010EEBITDAmultiple

compared

to

current

peer

trading

and

precedent

fertilizer

transaction

multiples

TerrashareholdersarenotreceivingadequatecompensationforthevalueofCFsestimatedsynergies



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Terras highly qualified and independent Board is


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Terra shighlyqualifiedandindependentBoardisfocusedondeliveringshareholdervalue

Terrahasanindependent,shareholderorientedBoard

TerrasBoardofDirectorshascarefullyandobjectivelyconsideredeachofCFsproposals

TerrasBoardofDirectorsandmanagementhavefocusedonbuildingTerrasmarketpositionanddeliveringshareholdervalue

TerrasDirectorsupforreelectionareexperienced,wellqualifiedBoardmembers

OtherTerra

Directors

are

also

adiverse

group

of

highly

qualified

leaders

Consistentandmeaningfulreturnofcashtoshareholders


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Terrahasanindependent,shareholderorientedBoard


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37

p ,

Boardcomposition

Terras

management

Terranominees

Diverse,high

caliber

group

of

Directors

with

significant

financial,

operational

and

strategic

experience

bothinandoutsideofagriculture,withahistoryofshareholderfriendlyactions

IndependentChairman,separatefromCEO

OnlyonememberofmanagementappointedtotheBoard

Appointedtwo

current

independent

Directors

based

on

shareholder input

NoDirectorisaffiliatedwithasignificantcustomerordistributor,asisthecasewithCF

Terraisledbyoneofthemostexperiencedmanagementteamsintheindustrywithdiversebackgroundsandextensivefertilizerindustryexperience

Theexecutiveofficersaveragemorethan15yearsofexperienceinthefertilizerindustry

MichaelBennett,PresidentandChiefExecutiveOfficer,hasbeen withtheCompanyfor36years

Notableexperienceinthepublicandprivatecompaniesinwhichtheyhaveheldseniorpositions

Extensiveexperienceacrossindustries,indepthknowledgeofenergymarketsincludingnaturalgas(thekeyTerrainput),internationalbusiness,financeandinvestments,andmanaginglarge,complexmergersandacquisitions

Consistentandmeaningfulreturnofcashto


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2.6%

3.9%

5.4%

28.4%

0.5%0.1%

8.4%

0.5%0.1% 0.0% 0.1%

3.2%

0.6% 0.4%

7.4%

0.4%0.4% 0.2%

0.5% 0.3%

2006 2007 2008 2009E

Terra CF Mosaic PotashCorp Agrium

gshareholders Since2006,twoyearsbeforeitspeersfollowedsuit,Terrahasconsistentlyreturnedcashtoitsshareholders.

Terracontinues

to

demonstrate

its

shareholder

friendly

approach

with

its

return

of

approximately

$750

millionofcashtoshareholdersthroughaspecialcashdividendtobepaidinDecember2009

Dividends+sharebuybacksasa%ofaveragemarketcap

Source: CompanyfilingsandFactSet.Note: 2009Ereflectsannualizedestimatesofdividendsandsharebuybacksbasedonprecedingreportedquarters.

Averagemarketcapitalizationcalculatedforeachrespectiveperiod.2009EreflectsaveragemarketcapitalizationYTDasof10/29/09.

PotashCorpspecialsharerepurchase

Includesdeclaredspecialcash

dividendof~$750million

CF$500millionsharerepurchase

program

Terraannouncedsharerepurchase

programofapproximately10%

ofoutstanding

commonstock

Includesannouncedspecialcash

dividendof

~$580

million

Whencashgenerationoutstrippedorganicgrowthopportunities,Terradidnot

hesitate

to

return

cash

to

shareholders

TerrasDirectorsupforreelectionareexperienced,


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39

wellqualifiedBoardmembers

HenrySlack

ChairmanoftheBoard

ServesasManagingMemberofQuarterwatch,LLC,afinancialadvisoryservicescompanysince2003

PreviouslyservedasCEOofMinorco,SA,aninternationalmining companythatmergedtoformAngloAmerican,from1991to1999

In1998Minorcoannouncedthedivestitureofits57%stakeinTerraaspartofamerger

agreementwith

Anglo

American

Corp.

PriortoTerradivestiture,participatedinthepurchaseoftheCourtrightplantandtheexpansionofthePortNealandWoodwardplants,whichTerracontinuestooperatetoday

AcquiredassetsinU.K.in1997andsolddistributionbusinessin1999

MarthaHesse

Served

as

Chairman

of

the

U.S.

Federal

Energy

Regulatory

Commission

from

1986

to

1989 ChiefBusinessOfficer(AssistantSecretaryManagementandAdministration),U.S.DepartmentofEnergy

1982to1986

Founded,ownedandwasPresidentandCEOofHesseGasCompanyfrom1992to2003

CurrentlyservesasChairmanoftheBoardofEnbridgeEnergyCompany,Inc.andDirectorofAMECplc

Verydeepknowledgeofthenaturalgasindustry,whichisthekeyinputforTerra

DennisMcGlone

Appointedbasedonshareholderinput

ServedasPresident/COO,President/CEOandDirectorofCopperweldCorp.,amajorNorthAmericanproducerofsteeltubingandfabricatedtubularproducts,from2002to2005

PriortoCopperweld,servedasVPandCorporateOfficerforArmcoInc./AKSteel,aleadingU.S.producerandinternationalmarketerofsteelproducts,from1996 to2001

OtherTerraDirectorsarealsoadiversegroupofhighly


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40

qualifiedleaders

DirectorofFalconOil&GasLtd.andcurrentChairmanofitsAuditCommittee

Servesas

the

Chairman

of

Real

Associates

Limited,

aprivate

company

which

invests

in

commercial

andresidentialpropertyprincipallylocatedinScandinavia

Over25yearsexperienceinthenaturalresourcesandextractive industries

ServedasFinanceDirectorofMinorcoSA,aninternationalminingcompany,from1992until1999

PresidentofSackettPartnersIncorporated,aconsultingcompany heestablishedin2000

Has

a27

year

career

in

investment

banking;

was

General

Partner

of

Lazard Frres

&

Co.,

and

ManagingDirectorandGroupExecutivewithTheChaseManhattanBank,nowJPMorganChase

ServesasChairmanoftheAuditCommitteesofbothSmithInternationalandForestOil

ServedasChairman,ChiefExecutiveOfficerandDirectorofAMEC Inc.from2000to2002andasPresidentandChiefExecutiveOfficerofAgraInc.(whichwassoldtoAMECin2000)

ServesasaDirectorofTeekayCorporation,aproviderofinternationalcrudeoilandpetroleumproduct

transportation

services

ServedasDirectorofTembecIndustriesInc.andofATSAutomationToolingSystemsInc.

Appointedbasedonshareholderinput

ServedasChiefFinancialOfficerandChiefInvestmentOfficerforEnduranceSpecialtyHoldingsLtd.ServedasaDirectorofEndurancefrom2002to2003

ServedasaDirectorofUnitedAmericaIndemnity,Ltd.,aspecialtypropertyandcasualtyinsurer,since2007,andservesasChairmanofitsInvestmentCommitteeandamemberofitsAuditCommittee

David

Fisher

Dod

Fraser

PeterJanson

JamesKroner

Board

member

and

Chief

Executive

Officer

HasbeenwiththeCompanyfor36yearsandisalsothePresident andChairmanoftheBoardofTerraNitrogenGPInc.

ServesasaDirectorofAlliantEnergyCorporationandtwoofitssubsidiaries

Michael

Bennett

TerrasBoardofDirectorshascarefullyandobjectively


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41

consideredeachofCFsproposals

TerrasBoardofDirectorshascarefullyreviewedeachofCFsproposalsandhasconsistentlyconcludedthatacombinationwithCFisnotfinanciallycompellingandlacksstrategiclogic

Overthecourseofthisyear,CFhasmade6separateproposals

At

the

Boards

direction,

Terra

as

well

as

its

representatives

and

advisors

have

met

with

CF

and

its

representativesandadvisors

TerrasBoardandmanagementalsoknowCFsassets,strategyandmanagementverywellbasedonpreviousdiscussionswithCF

In2004,TerradecidedtopursuetheacquisitionofMississippiChemicalinstead

In2007,CFinitiateddiscussionswithTerra,whichTerradecidednottopursue

EachtimetheBoardhasconcludedthattheindustrialandstrategiclogicofacombinationwithCFwasnotcompellingandthevaluepropositionwasinsufficienttomeritfurtherdiscussions

CFsproposal

on

November

1,

2009

represents

approximately

$2.00

increase

in

notional

value

over

its

previousproposal

Terracalculatesthatevenat$58pershareprice,thetransactionwouldstillbeover20%accretive,basedontheestimatemidpoint$120millionannualsynergiesthatCFassertsareavailabletothecombinedcompany

Conclusion


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Terraisastronginvestmentpropositionwitharobustneartermoutlook

and

solid

long

term

prospects

CF/Terracombinationlackscompellingstrategicrationale


TerrashighlyqualifiedandindependentBoardisfocusedondeliveringshareholdervalue

VoteforTerrasDirectorsontheWHITEProxyCardtoday


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Title

SubTitle

TerraIndustries

Inc.


43

Appendix

DerivationofestimatedunaffectedTerrashareprice


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44

Terratradedata22%and13%discounttofertilizerpeersandnitrogenpeers,respectively,onanNTMEV/EBITDAmultiplebasisoverthethreeyearperiodendingJanuary15,2009.Applyingthisdiscounttothecurrent2010EEBITDAfertilizerpeerandnitrogenpeermultiples,arangeofimpliedunaffectedmultiplesforTerracanbedetermined

TerratradedatanaverageNTMEV/EBITDAmultipleof7.1xforthethreeyearperiodendingJanuary15,2009

Theunaffected

Terra

share

price

can

be

derived

from

these

multiples

2010E EBITDA (IBES)(1)

Discount to Implied Unaffected Premium /

peers multiple price (Discount)(2)

Discount to fertilizer peers (3)

3-year average ending 1/15/2009 (22%) 6.7x $35.85 13%

Discount to nitrogen peers(4)

3-year average ending 1/15/2009 (13%) 7.1x $37.80 7%

Terra's historical trading multiple

3-year average ending 1/15/2009 NA 7.1x $38.18 6%

Source: Public filings, FactSet and IBES.

(1) Based on Terra's 2010E EBITDA of $504mm, per IBES.

(2) Based on CF's proposal price of $40.61, and CF's closing stock price of $83.25 as of 10/30/2009.

(3) Fertilizer peers include Incitec Pivot, Intrepid Potash, Israel Chemicals, K+S, Mosaic, PotashCorp and Yara.

(4) Nitrogen peers include Incitec Pivot and Yara.

Terra Salesvolumeandpricesandgascosts


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FiscalyearendingDecember31, 9MoEnded Projected

2006 2007 2008 9/30/2009 2010ESalesvolumes('000stons)

AnhydrousAmmonia 1,628 1,765 1,670 1,177 1,640

UAN32%BASIS 3,408 4,072 3,919 2,361 3,600

Urea 244 247 249 215 350

Ammoniumnitrate 769 968 990 650 950

Sales

prices

($/ton)

(1)

AnhydrousAmmonia $313 $337 $552 $314 $377

UAN32%BASIS 160 226 335 214 234

Urea 269 333 467 309 324

Ammoniumnitrate 203 224 309 204 231

GascostsNorthAmerica(excluding Trinidad)(2)

CostpermmBtu $7.03 $7.08 $9.33 $4.98 $5.27Source: Terra

management.

(1) Afterdeductingoutboundfreightcosts.(2) Includesderivativecosts.


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Keydates


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January15,2009: CFmadeanunsolicitedoffertoacquireTerraat0.4235CFsharesforeachshareofTerra

January26,2009:TerrasBoardofDirectorsheldameetingtoconsiderCFsJanuary15offer

January28,2009:TerrasBoardofDirectorsunanimouslyrejectedCFsunsolicitedoffer

February3,2009: CFdeliverednoticetoTerrathatitwillnominatethreenomineesforelectiontoTerrasBoardat

Terras

annual

meeting

of

shareholders

February9,2009:TerrasCEOmetwithCFsCEO,togetherwithadvisors

February23,2009: CFannouncedthecommencementofanexchangeofferforallofTerrasoutstandingsharesatafixedexchangeratioof0.4235CFsharesforeachshareofTerra

March5,

2009:

Terras

Board

of

Directors

unanimously

recommended

that

shareholders

reject

CFs

offer

March9,2009: CFannouncedarevisedproposalbasedonanexchangeratioof$27.50foreachTerrashare,withanexchangeratioofnotlessthan0.4129andnotmorethan0.4539CFsharesforeachshareofTerra;CFalsoannounceditwaspreparedtoissueparticipatingpreferredstocktoavoidobtainingCFshareholderapproval

March11,

2009:

Terras

Board

of

Directors

held

ameeting

to

consider

CFs

March

9proposal

and

rejected

CFs

revised

proposal

March23,2009: CFreviseditsproposalforTerrabasedonanexchangeratioof$30.50foreachTerrashare,withthesameexchangeratioofnotlessthan0.4129andnotmorethan0.4539CFsharesforeachshareofTerra

March24,2009: TerrasBoardofDirectorsheldameetingtoconsiderCFsMarch23proposalandrejectedCFs

revisedproposal


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TRA Terra Industries Nov 2009 Presentation

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