UPDATE: Agrium Launches Offer For Hostile Bidder

By Dow Jones

LONDON (Dow Jones) -- Canada's Agrium Inc. on Wednesday launched an unsolicited acquisition bid for CF Industries Holdings, which itself is making a hostile bid for fellow fertilizer producer Terra Industries.

Agrium (AGU), based in Calgary, said it's bidding $3.6 billion in cash and stock for CF Industries (CF), a deal that would add CF's North American nitrogen, phosphate and crop-nutrient distribution assets to Agrium's global wholesale and retail capabilities.

CF shares surged 14% to $63.59, while Agrium's U.S.-listed shares fell about 6% to $37.76 in mid-morning trade.

Terms would be structured so that each CF share could be swapped for $31.70 in cash and one Agrium share, carrying a value of $72 a share based on prices as of Tuesday's close.

Agrium said a deal with CF would create more synergies -- an estimated $150 million annually -- than would be yielded under the latter's plan to buy Terra Industries (TRA).

Agrium said a transaction would enhance earnings and cash flow in 2010 and "significantly" boost them afterwards.

Deerfield, Ill.-based CF seems to be a prime target in the fertilizer business.

Agrium disclosed in a public letter it's held deal talks since before CF went public in 2005, while Terra also approached CF several years ago about a combination.

On Monday, CF launched a all-stock bid valued at $2.1 billion for Sioux City-based Terra Industries, a deal CF said would create a fertilizer company with a bigger footprint in the U.S. grain belt that could serve more customers.

Agrium's bid is conditional on CF dropping the bid for Terra, shares of which have skyrocketed 50% since CF disclosed Jan. 15 it wanted to do a deal.

Terra's shares recently stood unchanged at $24.80.