Yara International ASA, the largest fertilizer maker, agreed to buy Terra Industries Inc. for $4.1 billion to benefit from lower U.S. fuel costs.

The company will pay $41.10 for each Terra share, raising the cash with a $2.5 billion rights offer, Oslo-based Yara said in a statement today. The price is 24 percent more than Terra's Feb. 12 close of $33.25 in New York. Yara fell as much as 7.1 percent today in Oslo, the most in almost eight months.

Buying Sioux City, Iowa-based Terra will give Yara six North American plants making nitrogen-based fertilizer. The price of natural-gas, used to produce the crop nutrient, has declined 64 percent in the past two years.

"It makes sense for them to secure more U.S. gas which may be structurally cheaper than European gas," said Samir Bendriss, a research chief at Pareto Securities ASA in Oslo who has a "hold" recommendation on Yara shares. "It makes sense strategically, but the price is too high."

Yara is paying 12.8 times Terra's net income, according to data Bloomberg compiled. Acquisitions in the agricultural chemicals industry were done at 10 times net income, according to the median multiple of 37 deals in the past 12 months.

"Yara is committed to the U.S. market, and this transaction presents an attractive opportunity for both companies to strengthen their positions in the U.S.," Yara's Chief Executive Officer Joergen Ole Haslestad said in the statement. "Both companies are strong in ammonia and nitrates, and have complementary geographical footprints."

Eoin Treacy's view Grain and bean prices remains in base formations following declines from their credit crisis' peak in 2008. At least in part as a result, interest in fertiliser producers has been slow to manifest itself and the sector has been a laggard particularly when compared to the industrial and precious metal miners. However, this appears to be changing with crop prices having stabilised at what historically would have been considered high nominal prices. The fact that global economic recovery is being led by the world's largest population centres where per capita incomes are rising is also helping to support this market.

Yara International successfully broke above the psychological NOK200 level in November, encountered resistance below NOK300 in January and has been consolidating the move since. A sustained move back below NOK200 would be required to question scope for further higher to lateral ranging over the medium term.

Agrium shares a similar chart pattern with Yara International and found support two-weeks ago near the psychological C$60. A sustained move back below that area would be required to question scope further higher to lateral ranging. Mosaic also found support at the upper side of the previous range which also coincides with the mean, represented by the 200-day moving average. A sustained move back below $53 would now be required to question scope for further higher to lateral ranging.

Potash Corp of Saskatchewan has been less consistent but also found support two-weeks ago and would need to sustain a move below C$100 to question scope for further higher to lateral ranging. K+S has been ranging above €40 since November and a sustained move below that level would now be required to question potential for it to follow a similar trajectory to the above shares.