CF shareholders back Agrium's hostile tender

NEW YORK/TORONTO (Reuters) - Canadian fertilizer maker Agrium Inc (AGU.TO) said on Thursday that 62 percent of CF Industries' (CF.N) shares have been tendered in favor of its nearly $5 billion hostile bid, but a different vote later in the week is more likely to determine the outcome of the drawn-out takeover battle.

Terra Industries Inc's TRA.N annual meeting on Friday, where CF has nominated a slate of three directors, more likely will determine a winner in the merger battle among the three fertilizer makers.

CF, which has been fending off its larger Canadian rival Agrium's overtures since February, is locked in its own hostile campaign to acquire Terra.

Agrium is offering $45.00 in cash plus one of its shares for each CF share in what the company has called its best and final offer. This implies a deal value of $101.90 per CF share, or $4.95 billion, based on Agrium's closing stock price on Wednesday. CF shares closed at $86.29.

Agrium said it has now extended its offer for CF until December 18. Agrium's bid for CF is contingent on CF dropping its pursuit of Terra.

Although a majority of its shares were tendered in favor of the offer, CF can continue to stymie a deal. The Deerfield, Illinois-based company has a poison pill and other defense mechanisms in place that would prevent Agrium from completing the transaction.

A similar percentage of CF shares were tendered in an earlier Agrium bid in June, but many viewed that vote not as a referendum on value, but on whether shareholders were interested in a deal with the company at all.

Calgary, Alberta-based Agrium pushed the most recent tender as a vote on the merits of the bid itself.

"Tendering your shares into this offer will send an unambiguous message to the CF board: the owners of CF want this deal at this price," Agrium told CF shareholders on Wednesday in a letter that was also printed in a full-page advertisement in the Wall Street Journal.

The almost year-long saga has led some investors to facetiously label the three-way battle the "Fertilizer Wars," or the "Ultimate Fertilizer Championship."

CF-TERRA BATTLE

Although CF would get the upper hand in the merger battle if its slate prevails at Terra's annual meeting on Friday, a victory would by no means ensure a deal with Terra.

Sioux City, Iowa-based Terra has an eight-member board, and only three seats are up for election this year.

The boards of both CF and Terra have repeatedly argued that the offers tabled by their respective suitors, are inadequate and undervalue their companies.

CF has also sweetened its bid for Terra and is currently offering $24.50 in cash and .1034 CF shares for every Terra share. Terra's board has also declared a special dividend of $7.50 a shares, which shareholders will receive on December 11 regardless of whether Terra reaches a deal with CF.

The current value of CF's bid is $33.42 without the dividend and $40.92 with the dividend. Terra shares closed Wednesday at $38.05.

Last week, top proxy advisory firm RiskMetrics Group recommended Terra Industries shareholders elect a dissident slate of directors backed by rival CF Industries Inc.

RiskMetrics' recommendations have had a strong role in deciding which deals win investor approval and, in some cases, have been influential in obtaining higher deal prices for shareholders.

However, the RiskMetrics report is in conflict with recommendations made by three other proxy advisers. Those firms -- Proxy Governance, Glass Lewis & Co and Egan Jones -- all backed the Terra slate.

Interestingly, RiskMetrics also recommended that shareholders of CF Industries should tender their shares into Agrium's hostile bid for CF, saying the offer is "compelling enough to at least earn a seat at the negotiation table."

(Additional reporting by Euan Rocha; Editing by Lisa Von Ahn, Dave Zimmerman)