Australian fertilizer maker Incitec Pivot offered to buy the rest of explosives maker Dyno Nobel in a cash and share offer that values Dyno at A$3.3 billion (US$3.1 billion).
Incitec, which owns 13 percent of Dyno, said the deal would cut costs at ammonia operations and allow it to use Dyno's North American manufacturing and distribution platform to increase sales into the fertilizer market.
The larger scale would also help expand into new regions and markets, it said.
The offer has been recommended by Dyno Nobel directors in the absence of a higher offer and pending an independent report.
Dyno Nobel Chairman Geoffrey Tomlinson said the offer "presents our shareholders with an attractive proposal and the opportunity to continue to participate in the strong outlook for the combined entity."
A sharp fall in Dyno's share price after it halted work at its Moranbah ammonium nitrate project in Australia in December following a blow-out in costs had investors expecting Incitec to make a bid.
Dyno shares surged 12 percent to A$2.62 after the bid.
Incitec said on Tuesday the offer for all the shares it does not currently own in Dyno would be 75 percent scrip and 25 percent cash and valued Dyno at A$2.80 a share. That implied a market capitalization of A$2.3 billion and an enterprise value of A$3.3 billion.
Dyno Nobel shareholders would receive 0.01406 Incitec shares and 70 Australian cents for each Dyno share.
The combined companies would "benefit from a unique exposure to the explosives industry during a sustained commodities boom and the global fertilizer industry's outlook for continued growth," Incitec said.
It had a A$2.4 billion bank facility agreed for the deal and said the acquisition would be earnings accretive in the first full year. Shares in Dyno last traded at A$2.34 while Incitec stock last traded at A$149.