CF raises offer for Terra to $4.58 billion

NEW YORK (Reuters) - Fertilizer maker CF Industries Holdings Inc (CF.N) raised its offer for smaller rival Terra Industries Inc TRA.N by more than 10 percent, bringing the value of the hostile takeover bid to $4.58 billion.

The move is the latest chapter in a year-long, three-way takeover battle and lifts CF's offer to more than double the $2.1 billion it originally proposed in January.

The higher bid is likely to bring new support for CF among Terra shareholders, according to analyst Mark Connelly of Sterne Agee.

"We see this as the first really credible bid they've made," said Connelly.

CF has sought to buy Terra and create the world's largest publicly traded nitrogen company, even as CF itself tries to fend off a hostile takeover bid from Canada's Agrium Inc (AGU.TO).

CF said it had raised the cash component of its bid for Terra by $4.75 per share, to $36.75 per share. It is also offering 0.1034 CF common share for each Terra share, including a $7.50 special dividend.

The new offer values Terra at $45.91 per share, based on Friday's closing CF price. That is nearly 18 percent above Terra's closing price on Friday.

Terra said in a statement that it had received the new proposal and would review it at a board meeting scheduled for later this week.

Last month, Terra shareholders voted to add a three new members proposed by CF to the Terra board, increasing the chances that CF's attempts to takeover its rival would be successful.

But the thin margin of victory for those new directors showed shareholders remained split on whether to back CF's bid, Connelly said, and kept the door open for Agrium efforts to buy CF.

Agrium has offered $45 cash plus one of its shares for each CF share in a deal that values CF at about $5 billion. Agrium said last week it would nominate a slate of directors at CF's annual meeting in 2010.

CF, which extended $2.5 billion in financing commitments for the potential Terra deal last week, said in a letter to the Terra board of directors dated December 4 that it was "prepared to meet immediately and to sign a merger agreement before the market opens on Monday, December 7th."

Shares of Terra jumped 6.8 percent in early trade on Monday to $41.70, while CF shares fell 13 cents to $88.42.

(Reporting by Matt Daily; Editing by Derek Caney, Dave Zimmerman and John Wallace)