CF Industries nixes Agrium’s improved offer; sweetens own offer to Terra

The board of directors of fertiliser maker CF Industries Holdings Inc. on Monday urged its shareholders to reject Agrium Inc.'s acquisition bid, and also said it had sweetened its takeover bid for Terra Industries Inc.

Last week Agrium said it would take its proposal to buy CF Industries directly to shareholders, offering $31.70 cash and one share of its stock for every share of CF Industries. CF Industries shareholders have the option of receiving either 1.7866 shares of Agrium stock or $72 cash for each of their shares.

CF Industries, which earlier rejected Agrium's $3.6-billion offer, said in a letter to its shareholders that Agrium's proposal is "grossly inadequate," significantly undervalues the company and is not in the best interest of the company and its shareholders. (See: Hostile bid for Terra lands CF Industries in Agrium's crosshairs / CF Industries reject Agrium bid, to continue to pursue Terra)

"Following a careful review of all aspects of the Agrium offer with management and its legal and financial advisors, your board concluded that Agrium's offer is grossly inadequate, substantially undervalues CF Industries and is not in the best interests of CF Industries and its stockholders," an official statement said.

The company also announced that its board of directors has reaffirmed its intention to pursue a business combination with Terra Industries.

" To that end, our Board has determined that CF Industries would be prepared to enter into a negotiated merger agreement with Terra, structured as outlined in our letter to you dated March 9, 2009, with an exchange ratio based on $30.50 for each Terra share, the exchange ratio to be not less than 0.4129 of a CF Industries share and not more than 0.4539 of a CF Industries share. The $30.50 per Terra share is a premium of over 85 per cent to Terra's stock price before we made our original offer on January 15, 2009," it said.

In January, CF Industries' original $2.1 billion offer proposed to acquire Terra Industries for 0.4235 shares of CF Industries per common share of Terra Industries. Earlier this month, CF Industries adjusted its deal to pay $27.50 for each Terra share with an exchange ratio between 0.4129 and 0.4539 of a CF Industries share. (See: CF Industries launches $2.37-billion hostile bid for rival fertiliser maker Terra)

Shares of CF Industries closed at $67.68 on Friday. Agrium shares closed at $36.26. Shares of Terra closed at $26.60.