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Fertilizer Wars V-Day: CF Wins!

Terra Industries agrees to be acquired by CF Industries after both Agrium and Yara Industries drop out of the race.
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NEW YORK (TheStreet) -- Chalk one up for Deerfield, Illinois. CF Industries (CF) - Get CF Industries Holdings, Inc. Report has won the fertilizer wars.

The way this drama has unfolded over the last 14 months, it's tempting to hold off -- just yet -- on declaring a final victor in the four-way battle for crop-nutrient market share. But it appears the deal is done:

Terra Industries


accepted CF's aggressive counteroffer in a joint announcement Friday morning.

Precipitating that result was a

two-step surrender after Thursday's market close





issued a press release saying that it would halt its pursuit of CF, which it had pressed in fits and starts since February 2009.

Then, Norway's

Yara Industries

announced that it was done bidding on Terra and would go no higher. The pair had struck a deal to combine last month, with Yara paying $41.10 a share in cash for the Sioux City, Iowa, company and a substantial foothold in the fragmented U.S. nitrogen-fertilizer market.

In the end, after a year's worth of attempts and put-downs, proposals and rejections, hostile deal tactics and anti-hostile deal tactics, CF threw a show-stopper bid onto the table -- topping Yara's offer by about $6 a share -- and whatever acrimony that may have built up between the two rivals during the long battle quickly fell away -- at least publicly.

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CF will pay $37.15 in cash plus 0.0953 of a share of CF stock for every Terra share outstanding, of which there are about 98 million, putting the value of the buyout at just under $4.7 billion, based on CF's closing price Thursday.

"Terra's board of directors believes that this transaction offers our stockholders a very significant premium for their shares," said Terra's chairman, Henry Slack, in the joint press release. "Taken together with the $7.50 per share special dividend paid by Terra in December, our stockholders are receiving an excellent return on their investment in Terra."

For its part, CF is claiming that it can find as much as $135 million worth of synergies at the combined company. Among other things, this will likely mean the shuttering of Terra's Sioux City, Iowa, headquarters, said Edlain Rodriguez, a stock analyst at Broadpoint Gleacher.

Because Terra and CF don't have much overlap in terms of production, the merger won't likely result in many layoffs, Rodriguez said.

In an ironic twist, officials of the Justice Department and the USDA are convening for a workshop in the town of Ankeny, Iowa, on Friday, where they will discuss antitrust issues in the agricultural business, noted Chris Damas, a fertilizer-industry analyst and investor. On the guest list are Attorney General Eric Holder, Secretary of Agriculture Tom Vilsack and a slew of farm-belt congressmen.

Midday Friday, Terra shares were falling 1.4% to $46.35 on volume of 24 million shares, quadruple the stock's average daily turnover. The stock followed the shares of its new parent into the red: CF's stock was trading at $96.75, down nearly 4%, as investors priced in the coming dilution.

To acquire Terra, CF is assuming about $4 billion in bridge and term loans, but the company will soon issue about $1 billion worth of equity to pay down some of that debt. CF has indicated that even with the stock issuance, the Terra purchase will be "significantly accretive" to its shareholders. It wasn't more specific.

It was an intense day for the fertilizer sector.

Potash Corp. of Saskatchewan


boosted its outlook for the first quarter based on what it sees as improving demand for its eponymous crop nutrient.

The Potash news lifted the shares

of all companies involved in potash production, including



, erstwhile CF suitor.

Shares of Agrium, perhaps the most diversified fertilizer and agricultural-products company on the continent, surged by nearly 8% Friday to $72.03. At midday, volume surpassed 5 million shares, more than double the daily average turnover in the name. Investors were also perhaps relieved that the company had given up the ghost on a CF acquisition.

-- Written by Scott Eden in New York


>>Potash Pops on Surprise Profit Outlook

>>Fertilizer War Shocker: Terra Likes CF Bid

>>Fertilizer Wars: Let's Make a Deal

>>Agrium Beats Bullish Drum for 2010

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Scott Eden has covered business -- both large and small -- for more than a decade. Prior to joining, he worked as a features reporter for Dealmaker and Trader Monthly magazines. Before that, he wrote for the Chicago Reader, that city's weekly paper. Early in his career, he was a staff reporter at the Dow Jones News Service. His reporting has appeared in The Wall Street Journal, Men's Journal, the St. Petersburg (Fla.) Times, and the Believer magazine, among other publications. He's also the author of Touchdown Jesus (Simon & Schuster, 2005), a nonfiction book about Notre Dame football fans and the business and politics of big-time college sports. He has degrees from Notre Dame and Washington University in St. Louis.