Nov. 2 (Bloomberg) -- Terra Industries Inc. rose the most in almost eight months in New York trading after rival fertilizer maker CF Industries Holdings Inc. boosted its takeover bid to about $4.05 billion and added a cash component.

Terra rose $2.14, or 6.7 percent, to $33.91 at 4:15 p.m. in New York Stock Exchange composite trading. The gain was the biggest for the Sioux City, Iowa-based company since March 3.

CF, which is itself the target of a hostile offer from Agrium Inc., offered $32 in cash and 0.1034 of a CF share for each share of Terra yesterday, or the equivalent of $40.61 per share, based on Oct. 30 closing prices. The previous offer was for 0.465 CF share for each Terra share, or about $3.86 billion.

“Terra never liked the lack of a cash component in CF’s previous offers,” Edlain Rodriguez, an analyst at Broadpoint AmTech in New York, said today in an interview. “This will make it much tougher for Terra to say no.”

The cash portion of the offer included the $7.50 per-share special dividend Terra previously declared, CF said in a statement. Morgan Stanley is acting as an adviser to CF and agreed to provide $2.5 billion of financing, the biggest leveraged loan commitment by a single bank this year.

‘Lot of Potential’

“The bankers are convinced this will be an outstanding combination with a lot of potential going forward,” Stephen Wilson, CF’s chief executive officer, said today in an interview. He said the combined company would be rated “near investment grade.” Terra debt is rated BB by Standard & Poor’s Ratings Services, two levels below investment grade, while CF has no outstanding bonds.

Terra, which has rejected Deerfield, Illinois-based CF’s previous offers as inadequate, said yesterday it would review the latest proposal.

“We believe by offering a substantial amount of cash that we provide a high degree of certainty of value and we provide an increased comfort that we’ll be able to close the transaction,” Wilson said in the interview.

CF’s latest offer comes less than three weeks before Terra’s annual meeting on Nov. 20. CF, which has been trying to acquire Terra since January, has nominated three directors to Terra’s board.

“We certainly expect to find a high degree of support both for our proposal and for the three independent directors,” Wilson said. “We’re looking forward to the annual meeting.”

The proposed transaction would create the world’s second- largest publicly traded nitrogen-fertilizer maker after Yara International ASA, CF executives have previously said.

Not ‘In My Lifetime’

Nancy Havens-Hasty, president of Havens Advisors LLC, said Calgary-based Agrium will probably raise its bid for CF. Agrium is offering $40 in cash plus one U.S. dollar-denominated Agrium share for each CF share, valuing CF at $86.95 a share or $4.2 billion, based on the Oct. 30 closing price.

CF has rebuffed Agrium’s offers since Agrium first moved to acquire CF in February.

“As I said this morning to one of my 25-year-old traders, the end of this saga is not only not going to come in my lifetime, it’s not going to come in his lifetime either,” Havens said in a telephone interview. Havens said she owns a “small amount” of CF and may purchase shares of Terra.

Agrium spokesman Todd Coakwell didn’t immediately return a call from Bloomberg.

CF Financing

Morgan Stanley’s financing for CF consists of a $1 billion senior secured term loan, a $300 million revolving credit line, and a $1.2 billion senior secured bridge loan, according to a presentation filed today with the U.S. Securities and Exchange Commission. Morgan Stanley’s commitment expires on Nov. 30 if a merger agreement isn’t reached by then.

CF, which rose 84 cents, or 1 percent, to $84.09 in New York, has climbed 71 percent this year.

Agrium gained C$1.16, or 2.3 percent, to C$51.50 at 4:24 p.m. on the Toronto stock exchange.

To contact the reporter on this story: Christopher Donville in Vancouver at cjdonville@bloomberg.net.

Last Updated: November 2, 2009 17:20 EST