Norway's Yara International ASA (YAR.OS) announced plans Monday to acquire U.S. fertilizer producer Terra Industries (TRA) in a $4.1 billion agreed cash deal that comes amid a scramble for global agribusiness assets.

The proposed acquisition tops the value of earlier bids made by U.S. rival CF Industries Inc. (CF) during an unsuccessful year-long hostile pursuit.

The global fertilizer market is recovering from a two-year boom-and-bust, triggering a series of efforts to tap improving supply and demand conditions.

The acquisitive Yara, which plans to finance the proposed deal with a $2 billion to $2.5 billion rights issue, had long been seen as a white knight for Terra. CF, which dropped its pursuit last month, still faces a near $5 billion hostile bid from Canada's Agrium Inc. (AGU).

Yara is already one of the world's largest fertilizer producers, and Terra is prized as a U.S. focused pure-play on nitrogen-based products with an expanding industrial unit complementing its agribusiness interests.

Nitrogen prices have been far more resilient than those for phosphate and potash, which are also used to produce crop nutrients.

"Yara and Terra are a perfect fit, and the combination will elevate Yara to a truly global leader in the industry," said Yara Chief Executive Jorgen Ole Haslestad.

The Norwegian group is offering $41.10 for each Terra share, a 23.6% premium to its target's $33.25 Friday close. U.S. markets are closed Monday. This compares with the indicative $39.64 of the lapsed cash-and-stock offer from CF, based on Friday's close and including a $7.50 special dividend paid by Terra.

Terra's management had expressed its desire to remain independent throughout its battle with CF, insisting that the offer undervalued the company. Chief Executive Michael Bennett will stay on to head a new unit combining the groups' assets, to be known as Yara North America.

Yara and Terra expect the proposed deal to close by the end of the second quarter, subject to shareholder and regulatory approval--including the Committee on Foreign Investment In The United States--as well as the successful execution of the rights issue.

The Norwegian government and the country's National Insurance Fund, Yara's two largest shareholders, said they planned to subscribe on a pro rata basis.

Yara shares slid 6.9% on uncertainty over the dilutive impact of the rights issue and concerns that the Yara is paying a full price for Terra. Ratings services Standard & Poor's and Moody's Investors Services also put the company on watch for possible downgrade.

Analyst Per Haagensen at Fondsfinans said the uncertainty will likely weigh on shares for some time. But he noted that the transaction "makes sense, there is no question about that." The proposed merger will allow Yara and Terra to strengthen their positions in the U.S. market.

The proposed deal was announced alongside fourth-quarter earnings and an upbeat assessment of industry trends.

"We saw a major improvement in fertilizer markets towards the end of the fourth quarter, as global nitrogen and phosphate markets turned demand-driven," Haslestad said.

Net profit of NOK1.42 billion ($239.5 million) compared with a year-earlier loss of NOK2.11 billion a year earlier, boosted by a NOK1 billion tax credit. Revenue was NOK13.40 billion, down from NOK18.76 billion a year ago.

-By Karl Bruze and Doug Cameron, Dow Jones Newswires; +46-8-5451-3095; karl.bruze@dowjones.com

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