UPDATE 4-Canada's Agrium bids $1.1 bln for Australia's AWB

* Agrium expected to trump GrainCorp's rival AWB bid

* Offer depends on due diligence, regulatory approval

* Agrium shares down 1.3 percent; AWB shares surge 30 pct (Adds analyst comments, retail map graphic, background, share price move; in U.S. dollars unless noted)

By Michael Smith

SYDNEY, Aug 16 (Reuters) - Canadian fertilizer maker Agrium Inc offered $1.1 billion for Australia's AWB , trumping a rival bid from local player GrainCorp , as it seeks to expand its global retail operations.

The battle for AWB, Australia's largest wheat exporter, marks the latest round of consolidation in the country's grain industry as offshore players scramble for a larger slice of the action in the world's fourth-largest wheat exporting nation.

Australia's wheat industry is counting on a bumper crop this year, while suppliers in Europe and Russia struggle with drought and poor production that have helped push wheat prices to a two-year high this month.

Industry sources said other big global competitors like Canadian grain handler Viterra and U.S. commodities firm Gavil Group have also looked at AWB, which lost its monopoly over Australia's bulk wheat exports two years ago.

Still, the weekend's all-cash bid by Agrium, the largest agricultural products retailer in North America, with a market capitalization of $10.5 billion, came as surprise and sent AWB shares soaring more than 30 percent on Monday.

"The acquisition should be accretive and is consistent with Agrium's growth strategy," RBC Capital Markets analyst Fai Lee said in a note to clients.

"While we would have preferred to see a lower proposed price or acquisition closer to North America, our initial assessment of the announcement is positive," said Lee.

Shares of Agrium opened lower on the Toronto Stock Exchange on Monday and were down 1.3 percent at C$69.18 at midday. AWB shares closed 29.7 percent higher at A$1.42, just below the A$1.50 a share offer.

Tom Elliot, managing director at MM&E Capital, noted that although GrainCorp may come in with a counter-bid, its stock price indicates that shareholders are not keen to enter into a bidding war.

GrainCorp shares jumped more than 6 percent to touch a nine-month high, indicating that investors felt it was unlikely that GrainCorp could come back with a higher offer. The shares finished up 4.2 percent at A$6.53.

Investors said Agrium's offer, a 37 percent premium to AWB's Friday closing price, was expected to beat out GrainCorp's lower all-share bid made last month.

The latest offer values AWB at A$1.2 billion, according to Reuters calculations, a premium to GrainCorp's all-share deal, worth around A$921 million, based on both companies' share prices at 0200 GMT.

Sources close to the deal said AWB would consider both offers but the Agrium offer looked like a "no-brainer".

"We would not be surprised if there were additional bids or if other companies joined the fray. Specifically, in our view, there is the potential for Viterra to enter the process, given potential synergies," UBS analyst Brian MacArthur said in a note to clients.

Viterra acquired Australia's ABB Grain Ltd in a $1.4 billion deal last September, making it one of the world's largest grain handlers. Viterra declined to comment on speculation that it could launch a rival bid for AWB.

Shares in other Australian agribusiness firms rose on speculation of further mergers and acquisitions in the sector, with shares in Elders Ltd jumping around 12 percent.

Map of AWB's Retail Network: http://link.reuters.com/tas35n

For comparative StarMine table: http://r.reuters.com/waj25n

For a TAKA-A-LOOK on latest wheat stories: [ID:nLDE6721M9]

Agrium wants to gain control of AWB's retail division Landmark Rural Services, which it expects to grow using its international fertilizer and crop protection sourcing capabilities.

Agrium's retail network in North America is roughly three times larger than the second-largest player and its retail unit alone boasted sales of more than $6 billion in 2009. It also owns retail outlets in Argentina and has been expanding its retail presence in Uruguay and Chile.

Earlier this year, Agrium bowed out of a hostile bid for U.S. rival CF Industries after CF scuppered any hope of a deal when it clinched an agreement to buy rival Terra Industries. [ID:nN12157160]

GLOBAL PARTNER

AWB has long been seeking to partner with a global player after losing its monopoly over Australia's bulk wheat exports two years ago, when the government abolished the single-desk system that the former Australia Wheat Board operated.

Analysts say it needs to bulk up to compete with big global competitors like Bunge Ltd , Cargill and Glencore, and has been shrinking ever since it lost its exporting monopoly. That followed a judicial inquiry that found the firm had paid kickbacks to the former Iraq government of Saddam Hussein to secure wheat sales.

Agrium's offer remains conditional on due diligence, foreign investment approvals and removal of a 10 percent shareholder cap under AWB's constitution.

AWB said it would continue to look at GrainCorp's bid, alongside the new offer. Last month's offer from GrainCorp took the market by surprise as AWB had been tipped to team up with an overseas player.

Under the earlier recommended GrainCorp offer, AWB shareholders would get one GrainCorp share for every 5.75 AWB shares, valuing each share at A$1.047.

Deutsche Bank is advising AWB, and Barclays Capital is advising Agrium. Flagstaff Partners is advising GrainCorp.

($1=$1.12 Australian)

($1=$1.04 Canadian) (Additional reporting by Euan Rocha in Toronto and Narayanan Somasundaram in Sydney; Editing by Dhara Ranasinghe and Rob Wilson)