Fertilizer maker CF Industries Holdings Inc relaunched its hostile bid for Terra Industries Inc , betting that a higher price of $4.75 billion would help it break up Terra's planned takeover by Yara International ASA .

Ending its weeks-long silence, CF strongly criticized Terra's planned tie-up with Norway-based Yara, which was announced about a month after CF called off its year-long effort to buy Terra in January.

We do not understand how Terra could have entered into an agreement with Yara without giving CF Industries an opportunity to bid on a level playing field, CF Chief Executive Stephen Wilson wrote to Terra CEO Michael Bennett.

Terra said its board will review CF's latest offer, and its deal with Yara could be canceled if it received a superior proposal, giving advance notice to Yara -- if Yara did not match the higher offer within five business days.

Prices for fertilizer and other agricultural commodities slipped during the recession, but are beginning to rebound as farmers plant more crops and the world population continues to grow. That's put more pressure on fertilizer companies to become more efficient, including gobbling each other up.

CF, which is currently fighting off a hostile takeover attempt from Agrium Inc , said its offer consists of $37.15 in cash and 0.0953 CF share for each Terra share, or about $47.40, based on Monday's closing prices.

The deal would dilute the stake of current CF shareholders and would create one of the continent's largest producers of nitrogen, an essential fertilizer for farmers.

Yara has offered $41.10 per share, all in cash.

Yara would get a $123 million breakup fee if Terra walked away. Yara representatives declined to comment Tuesday.

In midday trading, Terra shares were up $4.76, or 11.6 percent, to $45.96, while CF shares were down $4.03, or 3.8 percent, to $103.51. Yara shares fell 4.4 percent in Norway.

Even if CF's shares went down from $107 to $95, the bid value would only decrease by about $1 and CF's offer would still be more attractive than the Yara bid, said Broadpoint AmTech analyst Edlain Rodriguez.

The way the deal is structured, the volatility in CF's shares will not have a lot of impact on the bid, he told Reuters.


Last month, Terra agreed to be bought by Yara for $4.1 billion in an all-cash deal that valued the company at $41.10 per share.

All eyes are on Yara now, with many on Wall Street wondering whether the company will increase its own bid.

Yara always said they didn't want to get into a bidding war, and this is clearly going to be a bidding war, Rodriguez said.

Low North American prices for natural gas are part of the reason Yara wants Terra. Natural gas is a critical feedstock for fertilizer.

In midday Thursday trading, natural gas prices hovered around $4.68 per thousand cubic feet. The price had jumped above $10 just before the recession in 2008.

Strategically, this is pretty important to Yara, Dahlman Rose analyst Charles Neivert told Reuters. Yara is trying to get more and more production into lower-priced gas regions.

However, CF said it would be able to get about $75 million more in synergies from buying Terra than Yara could.

CF also said Terra is worth $5 more per share to it than to Yara, given the synergies.

CF has secured $4.05 billion in financing commitments for the deal, including $2.8 billion from Morgan Stanley Senior Funding Inc and $1.25 billion from Bank of Tokyo-Mitsubishi UFJ Ltd.

(Reporting by Matt Daily, Ernest Scheyder and Euan Rocha; Editing by Gerald E. McCormick and Dave Zimmerman)