Resolute Forest shareholders will receive $20.50 a share for each Resolute Forest stock they own, marking a premium of about 64% to the stock's closing price on Tuesday. That would value Resolute Forest at roughly $1.6 billion. Resolute Forest shareholders will also receive a contingent value right that entitles them to a share of future softwood lumber duty deposit refunds earned by the combined company.

New York Stock Exchange-listed shares of Resolute Forest jumped more than 65% in premarket trading to $20.66 a share in premarket trading.

Domtar, which was bought by the Paper Excellence Group last year, said the deal will help bolster Paper Excellence's expansion into North America. Domtar said it will create a new subsidiary, which will merge with Resolute Forest to execute the transaction.

Resolute Forest will continue to operate under the Resolute name once the deal is complete, the companies said. The current management team will remain in place at the company's headquarters in Montreal, and the companies plan to retain Resolute's production locations and current levels of jobs.

Resolute Forest stockholders are set to vote on the deal at a shareholder meeting in early fall, the companies said. The deal requires approval of a majority of the outstanding shares of Resolute Forest.

Fairfax Financial Holdings Ltd., which holds some 40% of Resolute Forest stock, has agreed to support the deal, the companies said. The companies expect the deal to close in the first half of 2023.