UPDATE 1-CF rejects Agrium's sweetened proposal

* Says board of directors rejects revised offer

* Says offer continues to undervalue the company

* Shares up 0.5 percent

TORONTO, Nov 6 (Reuters) - U.S. fertilizer maker CF Industries (CF.N) said on Friday its board rejected rival Agrium Inc's (AGU.TO) sweetened bid worth about $4.5 billion, arguing the proposal substantially undervalues the company.

CF has been fending-off Agrium's hostile bid since February, as it pursues its own hostile bid for smaller U.S. rival Terra Industries (TRA.N).

On Thursday, Agrium raised the cash portion of its bid by $5 per share to $45 plus one Agrium share for each CF share. This implies a deal value of $92.99 per CF share based on Agrium's closing stock price on Nov. 4. [ID:nN0599370]

But the bump in the offer failed to impress CF's investors, who were expecting a much bigger increase. CF shares fell sharply on Thursday as investors bet on the improved prospects of a deal between CF and Terra. [ID:nN0599370]

On Wednesday, Terra rejected a sweetened bid from CF, which has nominated a slate to Terra's board. A victory for the CF slate, which is slated to be voted upon on Nov. 20, would likely help clinch a deal with Terra. [ID:nN04543202]

CF shares were up 41 cents to $79.90 in premarket trading. (Reporting by Euan Rocha; Editing by Derek Caney)