* CF bid could spur Agrium to boost before Terra meeting
* Terra shares up 6 pct in afternoon trading
By Michael Erman and Ernest Scheyder
NEW YORK, Nov 2 Fertilizer maker CF Industries
Holdings Inc's (CF.N) new bid for Terra Industries Inc TRA.N
should spur CF's suitor Agrium Inc (AGU.TO) to raise its own
offer before Terra's annual meeting later this month.
Analysts and investors said they expect an increased Agrium
bid soon, as the company attempts to influence voting at
Terra's meeting on Nov. 20, where CF has placed up for election
a slate of three directors.
CF, which has been pursuing Terra since January, raised its
bid on Sunday and changed the structure of its offer to mostly
cash. But CF is itself fending off a hostile bid from Canada's
Agrium, and the new bid raises the stakes for both possible
"We expect Agrium to raise its bid one more time," Sterne
Agee analyst Mark Connelly said in a research note.
Still, Connelly cautioned not to expect too much of an
increase from Agrium, whose current cash and stock offer is
trading at a roughly 5 percent premium to CF's shares.
"Agrium has been disciplined in its bidding so far, and we
expect that to continue," he said.
Agrium declined to comment.
Fertilizer is an essential ingredient for crop growth, a
fact that has fueled M&A interest during the past year.
As world populations rise, and the amount of arable land
remains relatively stable, farmers are looking to produce more
Additionally, the advent of genetically modified crops has
created a steep demand for fertilizer, as the new seeds require
even more nourishment to grow.
CF only raised its bid a bit on Sunday, but removed what
had been seen as a major obstacle for a deal -- the need for
approval by CF's shareholders -- by making its offer mostly in
Arbitrage investors said they were taking CF's latest bid
for Terra more seriously than its previous ones because it
removes the uncertainty that would have been created by putting
the offer in front of CF shareholders.
On Sunday, CF bid $32 in cash -- including a $7.50 special
dividend that Terra plans to pay -- and 0.1034 of a share of CF
common stock for each Terra share. That comes out to roughly
$40.61, and is about 5 percent higher that CF's previous all
stock bid of 0.465 CF shares for every Terra share.
"This certainly puts a little more pressure on Terra to at
least come to the table," said Dahlman Rose analyst Charles
Terra shares were up $1.89, or 5.95 percent, to $33.66 on
the New York Stock Exchange in afternoon trading.
(Reporting by Michael Erman, Ernest Scheyder, editing by
Maureen Bavdek, Leslie Gevirtz)