Agrium Inc. (AGU) said Wednesday it hoped to close a proposed $3.6 billion offer for rival CF Industries Holdings Inc. (CF) within 90 days, a move that could break up its target's hostile bid for Terra Industries Inc. (TRA).

The Canadian company said it would offer the equivalent of $72 a share in cash and stock for its smaller competitor, adding that this was fully financed and contingent on CF dropping its pursuit of Terra.

Calgary-based Agrium said it had first approached CF in 2005, but its move also signals valuations in the sector may have bottomed after a dramatic spike and relapse over the past 18 months.

"This is the right time for us to be buying these nitrogen assets," Agrium Chief Executive Mike Wilson said on a conference call.

Wilson said a deal would be accretive to earnings in 2010 and "substantially" accretive the following year.

"CF Industries' board of directors will evaluate the proposal carefully in the context of CF Industries' strategic plans to create shareholder value, including its offer to acquire Terra Industries Inc. The board will make its determination regarding Agrium's proposal in due course," Deerfield, Ill-based CF said in a statement.

CF launched a proxy battle and an all-stock tender for Terra on Monday after its unsolicited offer was rejected by its target's board. The offer expires May 15.

Wilson said Agrium had no interest in acquiring Terra.

Investors in the fertilizer sector have seen a boom-and-bust cycle over the past 18 months, with stock prices doubling on soaring demand and prices before commodity markets reversed course from record highs in mid-2008.

Production has slumped as farmers reconsider purchases following the drops in global commodity prices since August, though Wilson said no disposals or plant closures are seen if it acquires CF.

Commodity prices remain well above their five-year averages, and analysts expect demand and supply conditions to balance as producers cut inventory. Demand will hinge in part on the level of fertilizer-intensive corn planting in the northern hemisphere this year.

CF acknowledged antitrust issues in its own pursuit of Terra, although it said these could be overcome, while Wilson said no such problems are seen for its proposed combination.

Agrium said it would offer one of its own shares and $31.70 in cash for CF, creating a company with annual revenues of almost $14 billion.

The terms represent a 30% premium over CF's Monday close, but after climbing as high as $66.58 earlier Wednesday, the stock was recently up 13.6% at $63.15. CF shares peaked last year at $172.99.

Agrium shares were down 7.5% at $37.68 on Wednesday. Terra was off 1.2% at $24.52.

Agrium said adding CF's strong North American nitrogen, phosphate and extensive crop-nutrient-distribution assets to its own global wholesale and retail capabilities "would greatly enhance our existing portfolio and enable us to create a premier global franchise across the entire agricultural value chain."

The company said the combined entity would be a leader in nutrient production and distribution. Agrium said it expects to realize substantial annual operating synergies of about $150 million from the combination within three years of closing.

The proposal isn't subject to a financing condition, Agrium added, noting it has sufficient cash resources and committed financing to fund the cash portion of the proposal.

-By Doug Cameron, Dow Jones Newswires; 312-750-4135; doug.cameron@dowjones.com

(Carolyn King and Rebecca Townsend contributed to this report.)