Marketing services provider Harland Clarke Holdings Corp said it would buy Valassis Communications Inc, a marketer of coupons and newspaper inserts, for $1.31 billion.
Valassis shares jumped to $34.30, above the offer price of $34.04, suggesting investors expect a higher offer.
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The company's revenue has shrunk since 2011 as newspaper circulation falls, while its quarterly profit has missed analysts' expectations for the last year.
The combined company will have about $3.3 billion in revenue, the companies said. Valassis reported revenue of $2.16 billion last year.
The deal, agreed at a 20.3 percent premium price over the stock's Tuesday close, is expected to close in the first quarter of 2014. Including debt and options, the deal is valued at $1.84 billion.
Valassis' board favored Harland's offer after studying a range of strategic opportunities, Non-executive Chairman Alan Schultz said.
Harland, owned by billionaire Ron Perelman's investment company MacAndrews & Forbes Holdings Inc, sold its financial software and services business to Canada-based Davis + Henderson Corp for $1.2 billion in July.
Harland Clarke, which has more than 15,000 clients, said it would finance the acquisition with cash on hand and borrowings and has received committed financing from Credit Suisse, BofA Merrill Lynch and Citigroup Global Markets Inc.
Valassis, founded in 1970 as a sales agent for printing companies, exited two underperforming operations - newspaper polybag advertising and sampling - last year and restructured its sales and marketing operations.
The company won $300 million in damages in a 2009 lawsuit against a News Corp subsidiary, News America Marketing, claiming unfair competition and "tortious interference." News Corp settled another lawsuit with the company for $500 million in 2010. (http://link.reuters.com/myn55v)
Harland Clarke, which also prints bank checks and makes cards, was advised by BofA Merrill Lynch, while Valassis was advised by J.P. Morgan.