Montreal-based Alliance Forest Products has been bought by Bowater, the biggest newsprint maker in the U.S. They've inked a stock, cash and debt deal worth $1.2 billion.

Under the agreement, Bowater will pay $13 in cash plus 0.166 shares of Bowater's common stock for each Alliance common share.

Using the past 20-day average trading price of Bowater stock implies a per share value of approximately $26 for each Alliance share.

The boards of directors of both companies have approved the transaction.

We are pleased to expand our investment in Canada, by acquiring a Qu(C)bec-based company with a well-deserved reputation for excellence, and we will maintain a significant management presence in Montr(C)al, said Bowater's President, Arnold M. Nemirow.

Pierre Monahan, Alliance's chief executive, said the sale is the next logical step for Alliance.

It provides our shareholders with significant, immediate and long-term value,'' he said Monday.

Bowater is based in Greenville, S.C. It manufactures newsprint as well as a number of other forest products in the U.S., Canada and South Korea.

Alliance specializes in timber harvesting and forest management, as well as the production and sale of newsprint. It employs 2,300 people in Quebec, New Brunswick and Alabama.

The merger is expected to be completed by the end of June.