SIOUX CITY, IOWA – After exploring opportunities to sell the distribution portion of its business and then deciding not to sell it, Terra Industries surprised many by announcing that it signed a contract to sell its distribution business to Cenex/Land O’ Lakes Agronomy Company for $361 million.
In the deal, which is expected to close by late July, Cenex/Land O’ Lakes acquires rights to the distribution business’ earnings from April 1, 1999, forward.
Included in the sale are Terra’s approximately 400 retail farm service centers in the U.S. and Canada, and its 50 percent ownership position in the Omnium chemical formulation plants in St. Joseph, Mo., and Blytheville, Ark.
The distribution business, which includes about 2,600 employees across 31 states and Canada, reported 1998 revenues of approximately $1.73 billion and operating income of $21.4 million.
Depressed nitrogen prices battered Terra Industries’ nitrogen production business, leading executives to give Terra distribution managers the opportunity to find a suitable buyer. That effort was reportedly suspended late in the first quarter of this year when the company decided not to sell the professional fertilizer business.
Terra anticipates a loss of less than $10 million on the transaction and will use sale proceeds primarily to reduce its debt obligations.
“Terra is taking this action to provide the company a stronger financial base,” commented Burton Joyce, president and CEO of Terra Industries. “With less debt, Terra will have greater flexibility both to weather the trough of the current nitrogen cycle and to take advantage of future opportunities. The distribution business has been a valuable part of the company for over 30 years, but under current market conditions, Terra and its board of directors believe this sale is a prudent step for the company.”
Cenex/Land O’ Lakes and Terra have also entered into a three-year nitrogen fertilizer supply agreement through which Cenex/Land O’ Lakes will purchase approximately the quantity that Terra Nitrogen currently supplies to both the distribution business and Cenex/Land O’ Lakes.
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