Fertilizer maker CF Industries Holdings Inc on Friday said it will buy rival Terra Industries Inc for more than $4.6 billion in cash and stock after Norwegian rival Yara International ASA decided not to raise its offer for Terra.

The deal ends a wild, lengthy battle for dominance of the North American fertilizer industry that included competing hostile bids and fights for board seats, as the stocks of all the companies involved surged.

Canada's Agrium Inc pulled its hostile, $5.4 billion bid for CF on Thursday night.

CF launched its unsolicited bid for Terra in January 2009, offering about $2.1 billion in stock for the smaller company.

The deal would make CF the largest producer of nitrogen-based fertilizers in North America and the second largest in the world behind Yara. The other three major players in the North American nitrogen arena are Agrium, Potash Corp

and privately-held Koch Industries.

The company will have huge earnings power due to rising ammonia prices and dwindling competition on the nitrogen side in the U.S. corn belt, independent analyst Chris Damas said.

I think longer term this deal is good for CF's shareholders, in the short-term obviously there will be some dilution, Damas said.

CF is paying $37.15 in cash and 0.0953 shares of stock for each Terra share. That means CF will issue just under 20 percent of its shares to Terra stockholders as part of the deal.

The company said in a filing last week that it also plans to offer about $1 billion in shares to pay back the loans it will take on for the deal.

The deal means about two-thirds of the ammonia supply in the heart of the U.S. corn belt will be controlled by the new entity.

Nitrogen-based fertilizers like urea and UAN come from ammonia. All three products are essential for corn growers. The U.S. Midwest is the largest corn-growing region in the world.

Jeffrey Doppelt, who with his family controls about 147,500 Terra shares, had hoped for a higher bid from Yara or more stock from CF.

Ultimately, he said the bid offered the best value and the best long-term potential of the two deals. The stock could grow, and I think after this deal there should be a stock split of at least two- or three-to-one, he said.

CONSOLIDATION FAR FROM OVER?

Yara, one of the world's biggest producers of mineral fertilizers, said that despite yielding in the battle for Terra, it remained upbeat on consolidation prospects for the splintered global fertilizer industry, a hotbed of recent deal activity.

Terra would be a perfect fit to Yara and attractive at our proposed valuation, but we will not increase our offer that was first accepted by the Terra board, Chief Executive Joergen Ole Haslestad said in a statement.

Consolidation of the fertilizer industry worldwide is far from over, he told Reuters. The way we see it today, acquisition options have been limited somewhat, but you never know how things will develop.

Terra shares fell 73 cents, or 1.6 percent, to $46.17 and CF shares fell $4.81, or 4.8 percent, to $95.80. Shares in Yara rose 7.5 percent to 257.1 crowns by 1234 GMT. Yara also stands to receive a $123 million deal break-up fee from Terra.

(Reporting by Michael Erman in New York and Richard Solem in Oslo; Additional reporting by Euan Rocha in Toronto, Ernest Scheyder in New York, and Joergen Frich in Oslo; Editing by David Cowell and Robert MacMillan)

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