UPDATE:CF Industries:Agrium Could Afford $100/Share On Takeover

CF Industries Holdings Inc. (CF) said Monday that fertilizer rival Agrium Inc. (AGU) could afford to price its hostile takeover bid at more than $100 a share, reiterating its rejection of a lower offer.

CF's board called on shareholders to reject Agrium's offer of $31.70 in cash and 1.7866 of its own shares for each CF share. There is also a cash alternative of $72 per share.

The Illinois-based company also continued its own hostile pursuit of Terra Industries Inc. (TRA), sweetening its all-stock offer by around 11% to $30.50.

CF shares were up 3% at $69.75 in mid-morning trade, with Terra up 3.7% at $27.58. Agrium's stock was 5.1% higher at $38.11.

The jockeying for position in the industry comes as fertilizer producers look to take advantage of the drop in sector stock prices since last summer to buy up production capacity ahead of an expected rebound in prices.

Steve Wilson, CF's chief executive, said on the call that industry pricing has improved since the final quarter of 2008.

CF declined to comment on whether it had held talks with Agrium, which is seeking to break up the proposed CF-Terra combination.

Agrium was unavailable for comment, but one analyst said that CF's sweetened offer for Terra risks increasing the "disenchantment" of its own shareholders and could work in Agrium's favor.

"The more that CF pays for Terra the worse it is for CF shareholders and the more attractive Agrium's offer becomes," said Raymond Goldie of Salman Partners in Toronto.

He said CF shareholders could follow the lead of HudBay Minerals Inc. (HBM.T) shareholders, who were angry at their company's proposed takeover of Lundin Mining Corp. (LUN.T) and revolted against management.

A shareholder vote to oust the Lundin board is scheduled for this week.

CF is looking to nominate a slate of three directors at Terra's upcoming annual meeting, scheduled to be held by May 15.

In a complex three-way tussle, CF executives railed against Agrium's offer Monday, criticizing its integration efforts in previous deals and claiming it was trying to buy its rival on the cheap at the bottom of the market.

On a conference call, Wilson said their advisers suggested Agrium could afford to pay in excess of $100 a share and still keep a deal accretive, based on forecast synergies of $150 million.

CF also criticized the "vagueness" of its suitor's claims for revenue and cost gains from a deal that create would the world's fourth-largest fertilizer producer, with annual sales of about $14 billion.

-By Doug Cameron, Dow Jones Newswires; 312-750-4135; [e-mail]

(Andy Georgiades contributed to this article)