(Reuters) - Canadian pulp producer Mercer International Inc (MERC.O) MRIu.TO plans to buy smaller peer Fibrek Inc FBK.TO for about C$170 million ($171.04 million), topping AbitibiBowater Inc's ABH.TO hostile bid by 30 percent.
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 tonnes.
The deal comes just days after Fibrek, which was looking for strategic alternatives in the face of falling pulp prices, rejected AbitibiBowater's bid of about C$130 million.
"This has been a challenging time for Fibrek ... we believe this offer meets our goal and provides a significant premium relative to Abitibi's unsolicited offer," Fibrek's chairman Hubert Lacroix said in a statement.
This is Mercer's first deal in five years.
Fibrek's shareholders can choose to opt for an all cash deal, a stock deal to get 0.0903 of a Mercer share for every one Fibrek share, or a cash-and-stock deal where they could get 54 Canadian cents in cash and 0.0903 of a Mercer share in stock for every share they hold.
Fibrek said it has agreed to waive off the shareholder rights plan it had raised in the wake of AbitibiBowater's bid. The waiver is for Mercer's offer alone, it said in a statement.
Raymond James is acting as financial advisor to Mercer, while TD Securities is acting as financial advisor to Fibrek.
Wood pulp futures have fallen more than 11 percent in the last year to trade at its lowest levels in two years while kraft pulp futures have fallen 12 percent in past ten months.
($1 = 0.9939 Canadian dollars)
Reporting by Aftab Ahmed in Bangalore; Editing by Supriya Kurane