CF Industries rejects Agrium bid, revises Terra offer

CF revises bid for Terra, rejects Agrium offer

* CF closed up 1.6 pct, while Terra closed down 3.6 pct

* Agrium shares close up 3.7 percent (Changes dateline, adds Agrium comment, background, byline)

By Euan Rocha and Scott Anderson

NEW YORK/TORONTO, March 9 (Reuters) - U.S. fertilizer maker CF Industries Holdings Inc's (CF.N) board rejected an unsolicited $3.6 billion bid from Agrium Inc as inadequate on Monday, and revised its offer for Terra Industries Inc (TRA.N).

Agrium (AGU.TO)(AGU.N), a rival, Canadian-based fertilizer producer, launched an unsolicited offer last month to buy CF for cash and stock to expand its presence in the nitrogen and phosphate fertilizer markets.

The bid was conditional on CF dropping its hostile offer for Terra, a U.S.-based fertilizer producer that has rejected CF's approach.

CF said Monday Agrium's proposal is a transparent attempt to interfere with its bid for Terra.

Agrium said it remains committed to acquiring CF and plans to commence an exchange offer shortly to acquire all outstanding CF stock.

"We are deeply disappointed that CF's board of directors has rejected Agrium's proposal without even attempting to engage us in exploratory discussions," said Agrium President and Chief Executive Mike Wilson in a statement.

TERRA BID

CF also altered its proposed offer for Terra. As long as CF's shares trade above Friday's closing price of $60.59, Terra shareholders would get at least $27.50 a share, or more.

Illinois-based CF earlier offered 0.4235 of its own shares for every share of Terra. It altered its exchange ratio to not less than 0.4129 of a CF share and not more than 0.4539 of a share.

As long as CF's shares trade between $60.59 and $66.60, Terra's shareholders will get $27.50 a share. However, Terra shareholders could get more than or less than that amount if CF shares move above, or below, that trading range, according to an investor presentation.

CF's initial offer in January valued Terra at $20 a share.

CF shares closed up 1.6 percent at $61.56, while Terra closed down 3.6 percent at $25.17, both on the New York Stock Exchange. Agrium ended up 3.7 percent at $32.58 on the NYSE.

CF is ready to issue up to 19.9 percent of its common shares required to do the deal with Terra, while the rest would be in preferred shares that would convert to common shares after the deal is done.

With its proposal, CF would circumvent a NYSE rule that requires shareholders of any NYSE-listed company to vote on the issuance of additional common stock if the issue increases outstanding shares by 20 percent or more.

"They are getting around going to CF shareholders. That way they can shrug off the Agrium offer," said Richard Kelertas, an analyst at Dundee Securities, in Montreal.

"It is now in the hands of Terra shareholders which I think will still reject it because they don't particularly want CF, and I believe once CF shareholders see this, they will be up in arms with their board." (Reporting by Euan Rocha and Scott Anderson; Editing by Frank McGurty and Jeffrey Benkoe)