Is Terra Nitrogen Co. L.P. a good buy? (TNH) Message Board

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Non-Tech : Is Terra Nitrogen Co. L.P. a good buy? (TNH)

TNH 83.96

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Apr 2 5:00 PM EST

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To: Robert L. Lee who wrote (14)	5/31/1997 8:34:00 AM
From: Jeff Maresh	of 91

Robert - The TNH story is a very interesting one and it looks like it is going to continue to be an interesting one. I sold my entire position this week after buying in late 1994. The reason I sold is that Terra Ind. (The General Partner) is now in a pretty good position to buy out the rest of the company on their own terms. TNCLP. has been anxious to own all of TNH. They made an offer for all outstanding shares around this time last year but the price was too low so the offer was rejected. According to the LP agreement, they can call all remaining shares of a particular class if the public owns <25% of those shares. After the conversion from SPU (Senior Preference Units) to CU (Common Units), TNCLP immediately snapped up the SPU's as you found out. I was surprised this happened so fast. After the conversion, there are only 35% of the CU's outstanding. If they call the remaining CU's, they have to pay the higher of 1) the average of the previous 20 trading days closing prices as of the date 5 days before the purchase is announced or 2) the highest price paid by TNCLP within 90 days preceding the date the purchase is announced. That's a fair price in a stable bull market, but not necessarily in a correction that lasts several months. I think it's a good possibility that TNCLP will buy out the remaining outstanding shares of TNH any time now. The scenario is that they pay market for 10% then call the remaining 25%. If the price drops between now and when they announce the buyout, I would lose quite a bit. I originally bought TNH because it was undervalued by my metrics and it provided me some downside protection. With a buyout looming, TNH no longer meets this goal. Regards Jeff

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