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Agrium raises bid for CF Industries

Fertilizer and ag retail giant Agrium has raised the stakes in what’s turned out to be a hostile cash-and-stock play for U.S. fertilizer maker CF Industries.

Calgary-based Agrium on Friday said it would raise the cash portion of its offer by 10 per cent to US$35, plus one common Agrium share, for each CF share.

Based on Agrium’s closing stock price Thursday, its new offer represents a premium of 35 per cent to CF’s closing price on Feb. 24, the day before Agrium announced its initial proposal, and 48 per cent to the 30-day volume weighted average price through that date, the company said.

CF’s board, in rejecting Agrium’s previous offer, had blasted it as a “transparent attempt” to interfere in the Chicago-based company’s own unsolicited play for another U.S. fertilizer firm, Iowa-based Terra Industries.

“For CF stockholders — who would receive a substantial premium plus significant participation in the upside of the combination — our offer is a far better alternative than paying a substantial premium for Terra Industries,” Agrium CEO Mike Wilson said in a release Friday.

“Moreover, we would consider increasing our offer further to reflect any additional value that the CF board and management can demonstrate arising from the combination of our two companies.”

Wilson went on to say CF has attacked the Agrium offer with “selective information and flawed financial analysis” and accused CF of disenfranchising its own shareholders by restructuring its offer for Terra so as to avoid a vote on it.

Agrium added that it has filed with the U.S. Securities and Exchange Commission preliminary proxy materials in connection with CF’s 2009 annual shareholders’ meeting, urging CF stockholders to “withhold” all votes in connection with the election of three CF nominees to the CF board of directors.

“Given CF’s end run around CF stockholders, withholding votes on directors and tendering shares is the way for them to have a voice” in CF’s future, Agrium said.

CF stockholders have “clearly expressed to Agrium their preference to receive a premium rather than pay a premium for Terra,” Agrium said.

CF on Monday boosted its unsolicited bid for Terra to an all-stock offer worth US$30.50 per Terra share. CF said its new offer represents a premium of “over 85 per cent” to its original offer on Jan. 15.

As well, Agrium denied what it said is “CF’s contention” that CF’s own cash would be used to fund the cash component of Agrium’s offer. Agrium is funding the cash portion of its offer through “available liquidity and fully committed financing.”

Agrium also ripped what it said it CF’s claim that it does not want to be exposed to Agrium’s “lower margin” retail business. “The fact is that Agrium has had higher average and less-volatile margins than CF” since CF’s IPO (initial public offering) in 2005, the company said.

Agrium went on to note it has “completed nine acquisitions and invested approximately US$3.4 billion, achieving synergies greater than announced and earlier than expected. In contrast, CF has announced a single acquisition of approximately US$25 million and has no track record of integrating acquisitions or extracting synergies since its IPO.”

Canadian assets are at stake in both companies’ offers, as CF operates a major nitrogen fertilizer plant at Medicine Hat, Alta., while Terra Industries also has a major nitrogen fertilizer facility at Courtright, Ont.

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