UPDATE 1-Verso Paper to buy NewPage Holdings for $900 mln
* Deal includes $250 mln in cash, $650 mln in notes
* Combined company to save $175 mln in pretax costs
* Verso shares up more than 300 percent to $2.75
Jan 6 (Reuters) - Coated paper maker Verso Paper Corp said it would buy privately held NewPage Holdings Inc for about $900 million in cash and Verso bonds to form a larger company that can withstand increasing pressure from digital media.
Verso's shares jumped more than 300 percent to $2.75.
Demand for coated paper from magazines and catalogues has been declining as lower readership and advertising in print media force publishing and media groups to move online.
NewPage, which emerged from Chapter 11 bankruptcy in December 2012, had said last month it would delay a planned initial public offering.
NewPage shareholders will receive $250 million in cash and $650 million in notes. Verso will also take on $500 million in NewPage debt, Verso said on Monday.
The combined company will have annual sales of about $4.5 billion and 11 manufacturing plants in six U.S. states.
Verso's sales fell 14 percent to $1.47 billion in 2012.
The deal is expected to save at least $175 million in pretax costs in the first 18 months after the deal is completed, likely in the second half of the year, the companies said.
Verso's shares were up about 170 percent at $1.77 on the New York Stock Exchange at 10:30 a.m. ET.