Update (1)
Nice article on SeekingAlpha talks about how Agrium’s bid for CF affects CF’s bid for TRA (and vice versa):

Article points to the fact that the market is pricing a higher probablity of the Agrium-Cf deal getting done instead of the CF-TRA deal:

“In the interim, the market seems to be betting on an Agrium-CF combination,” said Mr. Johnson, pointing to the relatively narrow spread between Agrium’s offer and CF Industries’ shares, compared with the gap between the price of Terra shares and the CF Industries’ bid.

I am going to re-think my position and possibly sell my TRA holdings.  I am getting close to a 10+ ROI just on the position now.

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Orig post from Aug 26, 2009:

Based on recent comments from CF Industries (CF), a rasied offer of 0.465 shares of CF for each share of Terra Industries (TRA), would yield a 20%+ ROI playing this arbitrage opportunity.

Current prices:

TRA: $30.11

CF: $83.75

$83.75 * 0.465 = $38.94

$38.94 - $30.11 = $8.83

$8.83 / $30.11 = 29.3%

CF Industries Holdings is willing to increase its offer for Terra Industries, the company said Wednesday. Two earlier takeover offers were rejected, The Associated Press reported.

I initiated a position in TRA today at $30.15/sh.

Press Release from CF.