Agrium to continue pursuit of CF Industries

Agrium CEO and President Michael Wilson speaks to shareholders during the company's annual general meeting in Calgary, Alberta May 13, 2009,

TORONTO (Reuters) - Canadian fertilizer maker Agrium Inc (AGU.TO) said on Monday it would persist in its hostile bid for U.S. rival CF Industries Holdings (CF.N), a move that could prolong the already drawn-out three-way merger battle in the sector.

CF has been fending off Agrium's overtures since February and is itself locked in a hostile campaign to acquire U.S. fertilizer maker Terra Industries (TRA.N). Agrium's roughly $5 billion bid for CF is contingent on CF dropping its bid for Terra.

CF came a step closer toward reaching a deal with Terra, when Terra's shareholders voted a slate of three CF nominees to its board on Friday.

However, Agrium argued that the support that CF's slate received at the Terra shareholder meeting was weaker than CF's own shareholder support for Agrium's offer.

More than 60 percent of CF Industries' shares were tendered into Agrium Inc's "best and final" offer last week. Despite the results of the tender, CF can continue to stymie a deal, as it has a poison pill and other defense mechanisms in place to prevent Agrium from completing the transaction.

"We look forward to meeting with CF to conclude a transaction and will continue to reach out directly to CF's management and board as well as to their financial advisers," Agrium's Chief Executive Mike Wilson said in a statement.

In the meanwhile, Terra has again rejected CF's latest proposal to buy it, saying the new offer was at the same price as CF's already-rejected proposal from November 1.

CF has offered to pay $24.50 in cash and 0.1034 share of its stock for every Terra share. The offer also includes a $7.50 per-share special cash dividend, which Terra shareholders will receive whether the deal is accepted or not.

CF's latest bid continues to value Terra at about $4.05 billion, but it includes a 30-day "go shop" provision subject to a break-up fee and expense reimbursement.

"We have proposed a process through which Terra and CF Industries could negotiate the terms of a transaction, while preserving Terra's ability to seek higher offers," CF's Chief Executive Stephen Wilson said in a statement on Monday.

The two chief executives are not related.

(Reporting by Euan Rocha, editing by Maureen Bavdek)