UPDATE: CF Industries Rejects Agrium Offer, Tweaks Own Bid For Terra

By Steve Gelsi

NEW YORK (Dow Jones) -- CF Industries Holdings Inc. said Monday its board of directors rejected a $3.6 billion offer from Canadian fertilizer giant Agrium Inc. as "grossly inadequate" while changing the terms of its own offer to buy smaller rival Terra Industries so as to bypass a vote of shareholders.

Deerfield, Ill.-based CF Industries (CF) said it'll now pay $27.50 in stock for each share of Terra Industries (TRA), based on an exchange ratio ranging from 0.4129 to 0.4539.

The price represents a premium of $1.39, or 5%, over Terra Industries' closing price of $26.11 a share on Friday.

Under the new terms, CF Holdings will issue up to 19.9% of its outstanding shares of common stock and shares of preferred stock.

"Approval of CF Holdings stockholders will not be required to issue the common stock or the preferred stock in the transaction," CF Holdings said.

If the merger were to close, stockholder approval would be required for the conversion of the preferred stock into common stock.

Shares of Terra Industries fell more than 3% to $25.19 in morning action, while CF Industries traded fractionally lower to $60.09. 5. Agrium's U.S.-listed shares also ticked fractionally lower, changing hands at $31.29.

Sioux City, Iowa-based Terra officially rejected an earlier offer from CF Industries on March 5. CF Industries initially bid 0.4235 of a share of its stock for each share of Terra Industries on Jan. 15.

That offer was worth about $18.73 a share based on CF Industries' closing price of $44.25 a share on Jan. 14. Since then, CF Industries' shares have rallied.

Also Monday, CF Industries said the Feb. 25 acquisition offer made by larger rival Agrium , (AGU) isn't in the best interest of the company or its shareholders.

"CF Industries ... believes that Agrium's proposal is a transparent attempt to interfere with CF Industries' proposed business combination with Terra," CF Industries said in a letter to Agrium provided to its shareholders.

Agrium offered about $3.6 billion for CF Industries on Feb. 25 in what would be a cash-and-stock deal valued at the time at $72 a share. CF Industries closed Friday with a market capitalization of $2.93 billion.