Canadian pulp-and-paper producer Paper Excellence has agreed to buy fibre-based products provider Domtar for around $3bn in cash.

Under the terms of the strategic business combination agreement, Paper Excellence will pay $55 a share for all issued and outstanding shares of Domtar‘s common stock.

This represents a 37% premium to Domtar’s closing price on 3 May.

Domtar provides several fibre-based products, including communication, speciality and packaging papers, market pulp and air-laid nonwovens.

The company currently has operations in more than 50 countries and employs around 6,400 people.

Paper Excellence global chief financial officer Joe Ragan said: “We are excited to add Domtar and its employees to the Paper Excellence global family.

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“This marks a major step in our global strategy of identifying well-positioned assets and positioning them for growth. Domtar is a natural fit for our culture of operational excellence.

“We are enthusiastic about entering the American market as we continually improve our ability to serve its expanding blue-chip customer base.”

Paper Excellence plans to continue Domtar’s operations as a standalone business entity.

The company will also keep Domtar’s corporate and production locations and there will be no changes to Domtar’s management.

The deal has been unanimously approved by Domtar’s Board of Directors but requires the approval of the company’s shareholders and the fulfilment of other regulatory and customary closing conditions.

It is expected to be completed in the second half of this year.

Domtar president and CEO John Williams said: “This agreement enables our shareholders to realize certain and immediate cash value at a significant premium for their shares.

“This transaction validates our long-term strategic plan for our leading paper and pulp businesses, and for our continued expansion into packaging.”

In March, Domtar sold its Personal Care business to private equity firm American Industrial Partners (AIP) for $920m.