CF board recommends shareholders reject Agrium offer

CF Industries Holdings Inc. recommended that shareholders reject Agrium Inc.'s takeover offer and sweetened its own bid for rival fertilizer maker Terra Industries Inc.

Agrium's latest offer is "grossly inadequate," Deerfield-based CF said today in a statement. CF said Agrium's agricultural-retailing operations would dilute shareholders' benefits from CF's expansion in more profitable nitrogen and phosphate-fertilizer manufacturing and distribution.

Agrium, the largest seller of seeds, pesticides and fertilizers in the U.S., on March 16 took a revised offer of as much as $72 a share in cash directly to CF's shareholders. CF boosted its own bid for Terra by about 11 percent and said that deal would be a "compelling combination."

"If Agrium is serious about this deal, they will probably have to raise their price somewhere, somehow," Joseph Gomes, a senior analyst at Oppenheimer & Co. in New York, said today in a telephone interview.

Agrium's offer includes an option for CF investors to trade each share for 1.7866 Agrium shares, or about $64.89 a share based on the March 20 closing price. CF shareholders also can elect to receive $31.70 in cash and one Agrium share.

At $72 a share, the offer values CF at about $3.48 billion. Under Agrium's offer, no more than 44 percent of the shares can be traded for cash, with the remainder exchanged for shares.

Agrium can afford to pay more than $100 a share for CF, based on Agrium's estimate of $150 million of annual savings from the acquisition, CF Chief Financial Officer Anthony Nocchiero said today on a conference call with investors and analysts.

In a separate statement, CF said it remains committed to buying Sioux City, Iowa-based Terra and raised its offer to about $30.50 a share, or about $3.05 billion, from $27.50 a share. The bid is based on 0.4129 to 0.4539 of a CF share for each Terra share, depending on CF's share price.

"The higher equivalent price recognizes that CF's share price has risen," Gomes said.

CF is pressing Terra's board to accept a negotiated merger and is proceeding with a plan to elect a slate of three directors at Terra's 2009 annual meeting.