Mercer International tops Abitibi's offer for Fibrek

Fri Feb 10, 2012 12:48pm EST
 
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By Ankur Banerjee and Aftab Ahmed

(Reuters) - Canadian pulp producer Mercer International Inc (MERC.O: Quote) MRIu.TO plans to buy smaller peer Fibrek Inc FBK.TO for about C$170 million ($171.04 million), topping rival AbitibiBowater Inc's ABH.TO hostile bid by 30 percent.

Mercer's first deal in five years comes at time when weak pulp demand has dragged wood pulp futures 11 percent in the last 12 months and kraft pulp futures 12 percent in the past ten months.

"Mercer sees a pulp market that is out of favor in the near term and a chance to buy a good quality mill at a price that is fair," David Shapiro, senior analyst at Aegis Financial said.

Mercer's C$1.30 a share offer represents a 15 percent premium to Fibrek's Thursday close and will give the company access to three mills with a combined annual production capacity of 760,000 tons, helping it raise its output capacity by 50 percent.

"On a dollar per ton basis, (Fibrek's) assets are cheap," said Amer Tiwana, managing director at CRT Capital's research division.

The deal comes just days after Fibrek, which was looking for strategic alternatives, rejected AbitibiBowater's bid of about C$130 million. AbitibiBowater operates under the name of Resolute Forest Products.

"We believe this offer is preferable to AbitibiBowater's initial offer. The bid is clearly superior. We look favorably to Mercer's offer," analyst Shapiro said.

DEAL DETAILS   Continued...