(Adds company's comments, share movement)
WASHINGTON, Dec 31 (Reuters) - Verso Paper Corp will have to divest paper mills in Maine and Wisconsin in order to complete its acquisition of NewPage Holdings, the U.S. Justice Department said.
The specialty paper maker's shares rose as much as 16 percent after it reached a settlement with the DoJ that will allow Verso to proceed with its $900 million deal announced last January.
The government said the deal would have risked higher prices for paper used for labels and magazines without the divestiture.
"We are pleased that we were able to address the concerns of the Justice Department while preserving the benefits of the transaction for our stockholders," Verso CEO David Paterson said in a statement.
NewPage is expected to divest the two mills to a subsidiary of Catalyst Paper Corp, Verso said.
The department's antitrust division filed a lawsuit and a proposed settlement in federal court in Washington, which will have to be approved by a federal judge.
Verso said it expects to complete the acquisition early next month.
The company's shares were trading up 11.7 percent at $3.62 on the New York Stock Exchange on Wednesday. (Reporting by Aruna Viswanatha in Washington and Kanika Sikka in Bengaluru; Editing by Joyjeet Das)