Farmland Industries, Inc. - Page 30




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             Terra stock to the public at a maximum price of $17.50 per               
             share.  The board of directors resolved that the proceeds                
             of this offering should be used “for exploration and/or                  
             purchase of oil properties” and to retire a portion of                   
             the company’s previously incurred debt.  On the advice of                
             petitioner’s investment bankers, the stock offering was                  
             delayed until February 1972.  Terra’s prospectus, which was              
             released on February 15, 1972, states that Terra “has paid               
             no dividends to date and does not expect to do so in the                 
             foreseeable future.”                                                     
                  Although petitioner’s management had expected to                    
             receive approximately $16 per share for the Terra stock,                 
             the offering price was only $12 per share, and the offering              
             netted only $4.2 million to Terra after expenses.  Terra                 
             used $2.3 million of the proceeds of the initial offering                
             to retire existing debt.  The remainder, $1.9 million,                   
             was added to Terra’s working capital.  After the offering,               
             petitioner retained 88.2 percent of Terra’s outstanding                  
             capital stock and members of the public owned 11.8 percent.              
             Petitioner did not make any other public offering of Terra               
             stock.                                                                   
                  Although Terra was formed primarily to raise outside                
             capital to support petitioner’s oil and gas exploration                  
             activities, very little capital was actually raised.                     






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Last modified: May 25, 2011