OSLO (Reuters) -– Norway's Yara agreed to buy Terra Industries for $4.1 billion to create the world's biggest mineral fertilizer producer and boost its U.S. presence, as rivals look to join forces to gain size and reach.

Norway's biggest-ever foreign takeover announcement on Monday comes a month after U.S. CF Industries Holdings withdrew its year-long hostile bid for Terra.
CF Industries is itself subject to a hostile offer from Canadian fertilizer maker Agrium, which said last week it was committed to its bid.
These and other M&A battles have kept the fertilizer sector in investors' sights, despite a sharp fall in prices last year as the global economic crisis hit. Analysts and producers expect a rebound in demand this year as farmers replenish their soil nutrient levels, stoking M&A.
“We expect the U.S. markets to pick up in a big way,” Yara Chief Executive Joergen Ole Haslestad told reporters, adding that the all-cash Terra purchase “will create a clear global No. 1 in the fertilizer industry.”
Energy-intensive fertilizer producers in North America have become increasingly attractive, Yara said, due to “structural changes” in U.S. energy markets as a boom in unconventional gas output curbs U.S. natural gas prices.
Yara said production costs for urea -- the main component of nitrogen-based fertilizer -- inherited from the Terra deal would be half the $1,500 per ton it would cost to build new capacity in, for example, the Middle East, where energy costs are low.
The deal also allows it to tap Terra's logistics in the United States. Terra has a strong presence in the Midwest, while Yara's U.S. operations are mainly based on the East coast.
The enlarged company will be No. 1 in production volumes of ammonia and UAN (a mix of ammonia and urea), although some potash-based fertilizer producers have larger market capitalizations.
Shares in Yara closed down 6.9 percent at 225.7 crowns on a slightly weaker Oslo bourse, valuing Yara at around $11 billion. Potash-based fertilizer group K+S was up 1.6 percent and Canada's Potash Corp
Analysts say that consolidation across the nitrogen-based fertilizer industry would continue as leading players seek to benefit from bigger scale and wider geographical reach.
“There are still many players in the fertilizer industry and a company like Yara seeks to reduce that number by increasing their own stake and earnings,” First Securities analyst Hans Erik Jacobsen said.
Yara's offer values Terra at $41.1 per share and represents a premium of 23.6 percent compared with Friday's closing price.
When CF pulled its cash-and-shares bid for Terra in January, the offer was valued at $38.89 per Terra share. Yara said it is planning a rights issue worth between $2 billion and $2.5 billion to help fund the deal. The Norwegian government, which owns 36.2 percent of Yara, would participate.
The enlarged company will have about 30 percent of the U.S. fertilizer market and an 8 percent global market share. Yara said it expects some $60 million annual synergies from the deal.
Yara, spun out from Norwegian group Norsk Hydro (NHY.OL) in 2004, has long said it seeks a 10 percent global market share. Takeovers by Haslestad and his predecessor Thorleif Enger have helped double Yara's production in six years.
The deal could be the largest-ever takeover of a fertilizer company, according to Thomson Reuters data, although it could be topped by Agrium's near-$5 billion tilt at CF Industries.
It is also set to be the largest foreign takeover by a Norwegian company, and the share sale could be the country's biggest, if it tops bank DnB NOR's $2.45 billion December issue, Thomson Reuters data shows.