In yet another attempt to takeover U.S. fertilizer producer CF Industries Holdings, Inc. (CF), Canadian agricultural nutrients maker Agrium Inc. (AGU, AGU.TO) Friday raised its offer for the company. As per the revised offer, CF stockholders will receive $35.00 in cash, an increase of $3.30, or 10.4%, in cash consideration, as well as one common share of Agrium for each CF share.

The increased offer marks a premium of 35% to CF's closing price on February 24, the day before Agrium announced its initial proposal, and 48% to the 30-day volume weighted average price through that date.

The fertilizer prices, which were astronomical at both the wholesale and retail level until June of 2008, have since fallen dramatically due to the economic meltdown, and so, have the prices of fertilizer stocks. With the market malaise eroding valuations, big players are stepping up deal making, targeting potential bargains. The favorable environment for merger and acquisition activity has led to a three-way takeover tussle in the fertilizer industry.

The latest announcement has added more pep to the buyout drama that is unfolding in the past few weeks among Agrium, CF and nitrogen products maker Terra Industries inc. (TRA).

It was on February 25 that Agrium made public its offer to buy CF for about $3.6 billion in cash and stock to boost its share of U.S. farm retail. Under that offer, each CF share was to be swapped for one Agrium share and $31.70 in cash. However, Agrium's offer came at a time when CF had already offered to buy Terra for $2.1 billion, although it was rejected by Terra citing undervaluation.

Further, CF launched an exchange offer for Terra and said that it is going forward with its proxy contest to replace three of Terra directors at the company's upcoming annual meeting. The exchange offer is scheduled to expire on May 15. However, Agrium said its offer was conditioned on CF terminating its bid for Terra.

While making the offer, Agrium noted that the combined company would have revenues of nearly $14 billion and that it expects annual operating synergies from the combination to be about $150 million, substantially in excess of those contemplated in CF's proposal to buy Terra. The acquisition would also triple Agrium's capacity to produce phosphate and urea ammonium nitrate.

But CF rejected Agrium's takeover offer calling it grossly inadequate and not in the best interests of CF Industries stockholders and said it would pursue Terra. Not to be discouraged, Agrium announced on March 16 that it commenced an exchange offer for CF shares and CF in turn recommended that its shareholders reject the offer by Agrium. CF also sweetened the offer for Terra.

Further, Agrium said Friday that it filed with the U.S. Securities and Exchange Commission preliminary proxy materials in connection with CF's 2009 annual meeting of stockholders, which urge CF stockholders to Withhold all votes in connection with the election of the three nominees to the CF Board of Directors.

Agrium's offer is not subject to a financing condition, a key point against the backdrop of the economic slowdown that the company has repeatedly stressed. Agrium has sufficient cash resources and committed financing underwritten by Royal Bank of Canada and The Bank of Nova Scotia to fund the cash portion of the offer. The offer and withdrawal rights, as reported earlier, will expire at 12:00 midnight New York City time on May 19, unless extended.

Agrium has also filed notification with the U.S. Department of Justice and the Federal Trade Commission, relating to the proposed acquisition of CF. The waiting period will expire on April 23, 2009, unless this period is earlier terminated or extended by issuance of a request for additional information or a second request.

Commenting on the increase in the offer, Mike Wilson, Agrium's President and CEO, said, Agrium's increased offer reflects our firm commitment to completing this transaction. For CF stockholders .our offer is a far better alternative than paying a substantial premium for Terra Industries. 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.

We are disappointed that CF would attack our offer with selective information and flawed financial analysis - and disenfranchise CF stockholders by restructuring the Terra offer to take the vote away from CF stockholders. We urge CF stockholders to send a message to the CF Board to engage with us by withholding their votes for the CF nominees at the April 21 Annual Meeting and tendering their shares into the Agrium offer, Wilson added.

RBC Capital Markets and Scotia Capital are acting as financial advisors, while Paul, Weiss, Rifkind, Wharton & Garrison LLP and Blake, Cassels & Graydon LLP serve as legal counsel. Georgeson Inc. is information agent in connection with Agrium's offer.

AGU that closed the regular trade on Thursday at $39.90, up from the previous close of $39.24, has dropped $0.10 in pre-market activity on Friday.

CF shares have gained $1.00 in pre-market activity from Thursday's close of $74.00.

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