'Solid understanding'

Terra said that the "compelling" deal would build on the groups' existing relationship built up through GrowHow, UK joint venture started in 2007.

Michael Bennett, the Terra chief executive, who will become head of Yara's North American division, said: "Yara has a solid understanding of the nitrogen business and the value we place on producing and distributing ingredients essential to meeting the needs of a growing global population."

The deal comes a month after Terra evaded a year-long pursuit by US-based CF Industries, rejecting a succession of raised bids including a December offer equivalent to about $38.40 a share once a special dividend of $7.50 a share was taken into account.

US market dynamics 

Yara said that the acquisitiong was being undertaken in part to exploit the "improved competitive edge" of US nitrogen producers, whose costs had been lowered by industry changes which had improved supplies of liquid national gas and shale gas, key raw materials.

"North American producers are in addition benefiting from logistical advantages, as the US will continue to need large imports of nitrogen, and the high construction costs for new plants now favour existing production capacity", Mr Ole Haslestad said.

Yara estimated it would cut costs by $60m a year, on a pre-tax basis, by stripping out duplicated functions, with a further $60m in "soft synergies", such as improving logistics and optimising factory use.

It added that the rights issue, aimed at supporting its credit rating, had been pencilled in for "around" May, and would set an issue price for the new shares at the time of the launch.

The Norwegian government, which owns 36.2% of Yara,  has said it is "positive" about subscribing for the rights issue, with the country's National Insurance Fund signing an underwriting and subscription agreement relating to its 6.6% stake.