Rayonier Advanced Materials (RYAM.N) said it would buy Canada's Tembec Inc (TMB.TO) for $807 million including debt to expand its business into packaging and forest products, sending Tembec's shares to a five-year high on Thursday.
The deal comes at a time when Canada is resisting a move by the United States to impose tariffs on Canadian lumber imports.
"I call it (tariffs) an annoyance but not something fundamental," Tembec CEO James Lopez told Reuters.
Tembec shareholders will get C$4.05 ($3.02) in cash, or 0.2302 of a Rayonier share, for every Tembec share they own, the companies said.
The offer price is at a premium of 37.3 percent to Tembec's Wednesday close. The deal includes $487 million in debt.
RBC Capital Markets analyst Paul Quinn said he expects to see increased consolidation in the industry.
Lumber companies such as West Fraser Timber Co (WFT.TO) and Interfor Corp (IFP.TO) will likely buy private companies in the United States and Canada, Quinn added.
Rayonier, which supplies cellulose commonly found in cellphones, computer screens, filters and pharmaceuticals, said it would finance the cash portion of the deal with cash in hand and debt.
Tembec's shares surged nearly 38 percent to $4.07, while Rayonier's were up 10 percent.
BofA Merrill Lynch is Rayonier's financial adviser and McCarthy Tetrault LLP, Hogan Lovells and Wachtell, Lipton, Rosen & Katz are its legal advisers.
Scotia Capital and National Bank Financial are Tembec's financial advisers and Stikeman Elliott LLP, Cahill Gordon & Reindel LLP, Dechert LLP and Slaughter and May are its legal advisers.
($1 = 1.3428 Canadian dollars)
(Reporting by Yashaswini Swamynathan and Ahmed Farhatha in Bengaluru; Editing by Martina D'Couto)