TORONTO (miningweekly.com) – US fertiliser products group CF Industries has rejected a takeover proposal from Calgary-based rival Agrium, and said on Monday it would be prepared to raise the price of its own takeover offer for Terra Industries.

The Agrium proposal is “grossly inadequate” and “opportunistic”, CF CEO Stephen Wilson said in a letter to the Agrium board, which was posted on CF's website.

Agrium announced on February 25 it had proposed to pay CF Industries shareholders one Agrium share and $31,70 in cash, or $72, for each CF share held.

However, Wilson said on Monday that, besides being undervalued, the proposed takeover was “a transparent attempt to interfere with CF Industries’ proposed business combination with Terra”.

In a separate letter to the board of Iowa-based Terra, he said CF remained determined to complete a transaction with the firm, and offered to improve the terms it has proposed if Terra will enter into a negotiated merger agreement.

CF Industries would agree to an exchange ratio based on $27,50 for each Terra share, with an exchange ratio of not less than 0,4129 and not more than 0,4539 of a CF Industries share, Wilson said.

The $27,50 per share represents an almost 70% premium to Terra’s stock price before the CF offer was made public, he pointed out, “while peer group stock performance has been essentially flat since that time”.

Terra has indicated that it has doubts over whether CF would get the go-ahead for a deal from its own shareholders, but Wilson said he was prepared to structure a transaction so that CF shareholder approval is not required.

CF could issue participating preferred stock that would trade at parity with the company's common stock, but, according to NYSE rules, would not require shareholder approval to be issued.

The company will go ahead with plans to replace three of Terra's directors with its own nominees at the company's upcoming annual meeting, in May.

“Our confidence in the support of Terra’s stockholders is based on our belief that Terra’s stock would be trading very significantly below its current level absent our offer and the expectation of a business combination with CF Industries,” Wilson commented in his letter.

“We have been willing to engage in meaningful discussions since we made our offer almost two months ago, and we continue to be willing to engage.”

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