SIOUX CITY -- Terra Industries shares jumped 7 percent in early trading Monday upon news that CF Industries Holdings raised its hostile offer for its fertilizer rival.

For the first time, CF added a cash portion to its takeover bid for the Sioux City-based company. CF, headquartered in suburban Chicago, said its offer now includes $32 in cash -- including the $7.50 per share special dividend declared by Terra -- and 0.1034 of a CF common share for each Terra share.

The revisions increases the value of the deal to about $4.1 billion, or $40.61 per share, based on Friday's closing price for CF shares. CF said it represents a 28 percent premium over Terra's closing price on Friday and a "significantly higher premium'' that Terra shares would have traded without takover speculation.

The latest bid sent Terra shares up $2.33, or 7.33 percent, to $34.10 in Monday morning trading. CF shares rose 89 cents, or 1 percent, to $84.14.

By including a cash portion, CF hopes to remove what analysts viewed as a major obstacle to completing a deal -- gaining approval from CF shareholders.

"The strategic benefit of combining these two great companies is undeniable,'' CF President and CEO Stephen Wilson said in a statement. "The substantial cash in our offer makes the combination far more accretive for CF Industries stockholders, while providing certainty on value and closing for Terra stockholders."

In a statement, Terra's board of directors, which has repeatedly rejected CF's overtures, said it would review the latest offer.

Unable to negotiate a deal, CF has taken its fight directly to Terra shareholders, urging them to elect three CF-backed nominees at Terra's annual meeting on Nov. 20. Terra has lobbied its shareholders to re-elect three incumbent directors at the meeting in New York City.

While pursing Terra, CF has been resisting Canadian rival Agrium Inc., which has been trying to take over CF since February.

Last month, Terra Industries announced it had agreed to buy a 50 percent stake in an Agrium plant in Alberta, Canadian. The $250 million deal is aimed at helping Agrium overcome regulatory issues that had threatened to derail a possible Agrium-CF combination.