Nov. 4 (Bloomberg) -- Terra Industries Inc.’s board rejected an increased takeover offer from rival fertilizer maker CF Industries Holdings Inc. as “inadequate” and “opportunistic.”

CF’s proposal also is “not in the best interests of Terra and its shareholders,” Sioux City, Iowa-based Terra said today in a statement. Terra, a maker of nitrogen-based fertilizer, has rejected CF’s previous offers as inadequate.

CF, which itself is the focus of a hostile bid from Agrium Inc., boosted its takeover offer on Nov. 1 to $32 in cash and 0.1034 of a CF share for each share of Terra, valuing the company at $4.07 billion at yesterday’s closing prices. The previous offer was for 0.465 CF share for each Terra share, or about $3.96 billion.

“I’d be shocked if they accepted CF’s offer given that Terra has already agreed to buy assets from Agrium to facilitate Agrium’s takeover of CF,” Louis Meyer, a New York-based analyst at Oscar Gruss & Son Inc., said in an interview before Terra’s announcement.

Agrium, based in Calgary, said last month it agreed to sell part of its nitrogen facility in Carseland, Alberta, to Terra to assuage possible antitrust concerns about Agrium’s proposed takeover of CF.

CF has rebuffed Agrium’s offers since Agrium first moved to acquire CF in February. A successful bid for Terra may help CF fend off Agrium.

CF Response

In response to Terra’s rejection, CF said in a statement its offer was “full, fair and compelling.” The Deerfield, Illinois-based company urged Terra shareholders to support the deal by voting in favor of a slate of three CF-backed directors at Terra’s Nov. 20 annual meeting.

Terra rose 66 cents, or 1.9 percent, to $35.54 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have more than doubled this year.

CF increased 96 cents, or 1.1 percent, to $86.39 in New York. Agrium fell 8 cents to C$51.23 on the Toronto Stock Exchange.

The cash portion of CF’s offer included the $7.50 per-share special dividend Terra previously declared, CF said. Morgan Stanley is acting as an adviser to CF and agreed to provide $2.5 billion of financing.

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

Last Updated: November 4, 2009 16:16 EST