UPDATE 4-Fibria shares fall, Suzano rises on creation of Brazil pulp giant

(Adds BNDES comments on the deal)

SAO PAULO, March 16 (Reuters) - Brazil's Suzano Papel e Celulose SA won the battle for control of larger rival Fibria Celulose SA, creating the world's biggest wood pulp producer despite aggressive offers from Netherlands-based Paper Excellence BV.

The new company combining Suzano and Fibria will have a total capacity of 11 million tonnes of pulp a year.

Fibria shares were trading 9.5 percent down at 64.70 reais in mid-morning in Sao Paulo as investors adjusted the price of the deal announced in a Friday securities filing. Paper Excellence had offered 71.50 reais per share.

Suzano shares, after rising 24 percent at opening, were up 14.5 percent at 26.94 reais. Controlling shareholders Votorantim Participações SA and BNDESPar, the investment arm of Brazil's state development bank BNDES, said they agreed to a cash-and-share offer from Suzano worth 35 billion reais ($10.7 billion) at Thursday's closing price. As Suzano shares rose, the value of the deal reached 35.8 billion reais.

That proposal was still lower than a sweetened last-minute offer of nearly 40 billion reais in cash from Paper Excellence, according to a person with knowledge of the bid.

BNDES director Eliane Lustosa, though, said Paper Excellence's bid was not firm. "We saw it as an intention to present a proposal. Paper Excellence did not present financing for the bid or guarantees," Lustosa said.

"Suzano's proposal was the only one we had, with all banks' commitment," she added. BNDESpar will receive 8.5 billion in cash and a 11 percent stake in the new company. The cash payment represents the largest divestment in the bank's history.

The outcome underscored the continued influence of BNDES, a shareholder in both Fibria and Suzano, which has been used by Brazil's government in the past to engineer "national champions" a policy publicly disavowed by the bank in recent years.

The deal is still subject to antitrust approval in Brazil, the United States, the European Union and China, Fibria said. An escape clause in the deal would allow Suzano to call it off if regulators force the sale of more than 1.1 million tonnes of capacity.

BNDESPar will receive 8.5 billion reais ($2.6 billion) in cash and stock in the new firm, it said in a separate statement.

The development bank had pressed Paper Excellence for bank documents proving that its bid had firm financing.

Paper Excellence, controlled by the Wijaya family, which also owns Asia Pulp & Paper Company Ltd, offered to pay a $1.2 billion break-up fee if the deal failed to get funding, the source said, but it was not enough to sway the state bank.

($1 = 3.28 reais) (Additional reporting by Rodrigo Viga Gaier in Rio de Janeiro and Alberto Alerigi Jr. in Sao Paulo Editing by Brad Haynes, Daniel Flynn and Nick Zieminski)