Fertilizer-maker Agrium Inc. (AGU) has raised its takeover bid for smaller rival CF Industries Holding Inc. (CF). The company has increased its exchange offer for acquiring all of the outstanding shares of CF Industries to $92.99 per CF share based on Agrium’s closing stock price on Nov 4, 2009. Under the terms of the offer, stockholders would receive $45.00 in cash − an increase of $5.00 or 12.5% in the cash consideration − and one common share of Agrium for each CF share. 

According to Agrium, this offer provides a premium of over 67% to CF’s closing price as on Feb 24, 2009, the day before Agrium made its first bid, and about 84% to CF’s 30-day volume weighted average price. Agrium has extended the expiration date of the exchange offer to Nov 18, 2009. 

However, CF rebuffed Agrium’s offer, alleging substantial undervaluation of the company. Meanwhile, since the beginning of the year, it is also pursuing rival Terra Industries (TRA), who has consistently rejected CF’s proposal on the same grounds. Last week, CF had upped its own bid for Terra, whose Board of Directors immediately rejected the offer for the sixth time since January. 

CF has been pursuing Terra to partly thwart Agrium. In its latest bid, CF had offered $32 a share in cash plus a fraction of a CF share in exchange for each Terra share. The cash portion of the bid includes the $7.50 per share special dividend declared by Terra as an anti-takeover measure, a point that Terra promptly stated in its letter, giving the idea to its shareholders that they would effectively be giving away $750 million on accepting the CF offer. Terra believes that CF’s latest proposal is financially inadequate, even by applying valuation methodologies used by CF, and is only $2.00 per share more than the nominal value of its prior proposal. 

The CF−Terra−Agrium tussle is part of a three-way battle for power in the fertilizer industry. Besides, the industry has been under strong consolidation pressure with fertilizer prices declining sharply.
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