Canada’s Mercer International Inc. raised its offer for specialty pulp maker Fibrek Inc. by 8 per cent to further strengthen its position against rival bidder AbitibiBowater Inc.
Fibrek, which counts investment guru Prem Watsa’s Fairfax Financial Holdings Ltd. as its largest shareholder, is the target of a two-way battle for control as pulp producers look to cash in on surging Chinese demand for tissues.
On Wednesday, Mercer raised its offer to $1.40 per share from $1.30 per share, valuing Fibrek at about $182-million. Mercer raised the cash portion to about $83-million from about $70-million.
Mercer’s revised offer is 40 per cent higher than the $1-per-share bid from Abitibi, which operates under the name Resolute Forest Products.
Mercer’s earlier offer had been the higher of the two bids, but some Fibrek shareholders had been backing Abitibi.
Abitibi declined to comment on the raised Mercer bid.
Fibrek’s board, which supports the Mercer bid, has also adopted a poison pill that would enable shareholders to benefit from the increased offer.
“We are taking measures to promote shareholder democracy in the face of a highly coercive unsolicited bid by Abitibi,” Fibrek chairman Hubert Lacroix said.
The rights plan, which will expire on May 11, will give shareholders sufficient time to weigh the two bids, Fibrek said.
Abitibi and Mercer have been engaged in a battle for Fibrek since February as the companies look to gain access to its three mills with a combined annual production capacity of 760,000 tonnes.
Both the companies are currently locked in a legal battle, with Abitibi trying to block the Mercer bid.
Earlier on Wednesday, Fibrek said Canada’s Supreme Court granted its motion to hasten an appeal against a Quebec court decision in Abitibi’s favour.
“I do not think 10 cents changes the court’s opinion, but I do think that the court is moving towards being a little bit more favourable to Fibrek,” analyst Amer Tiwana of CRT Capital Group said.
Despite a higher offer from Mercer, Abitibi has persuaded Mr. Watsa’s Fairfax to support its bid.
“We continue to support our contractual agreement with Resolute,” Farifax spokesman Paul Rivett said.
Fibrek said Abitibi owns 45.74 per cent of its shares.
Following an amended agreement, Fibrek has now agreed to increase the expense reimbursement fee payable to Mercer to $2.4-million.
Fibrek’s stock has gained nearly half of its value since the end of November when Abitibi made the first bid.
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