The Montreal-based company will pay 285 million euros, or about C$403 million, to acquire the European company's equity. It will also assume debt that will bring the total value of the transaction to about 400 million euros, or C$565 million.
"The acquisition of Indas advances our transformation into a leader in personal care, an attractive market segment that is an important growth engine for Domtar," said president and CEO John Williams.
"With the addition of the new business, Domtar will become one of the leading adult incontinence products manufacturers in Europe, providing the critical mass upon which to build a pan-European business."
Since entering the adult incontinence business in 2011 with the acquisition of Attends HealthCare, Domtar has added the European Attends business and U.S.-based EAM Corp., which develops and supplies the core material used in feminine hygiene products, baby diapers and puppy pads.
Domtar (TSX:UFS) has said it is on track to deliver $208.6 million (US$200 million) in pre-tax operating income or EBITDA by 2017 from the personal care assets it currently owns. However, the company is hoping acquisitions in the Americas and Europe will allow it to boost that contribution to between $313 million and $521 million (US$300 million to US$500 million).
Indas is Spain's top diaper maker. Spanish buyout firms Portobello and Santander's Vista Capital bought the company in 2007 for about 350 million euros.
Michael Fagan, senior vice-president of Domtar's personal care division, said Indas' line of products will be added to Domtar's current portfolio.
"The combination of our strong franchise in Northern Europe with Indas' best-in-class adult incontinence products business in Southern Europe promises to deliver solid results," he said.
In addition to incontinence products, Indas makes absorbent-related hygienic and medical products that are sold through pharmacies, hospitals and retail stores. The company, which operates a manufacturing facility in Toledo, Spain, has annual earnings of about 46 million euros (C$65 million) on 190 million euros (C$270 million) of annual sales.
Indas CEO Javier Martin said the acquisition by Domtar is "a great outcome" for its customers and employees.
"Domtar is a strategic long-term owner who is committed to growth in personal care and they will give us access to the resources and the technology to accelerate our growth plans and be successful."
The deal is expected to close by year-end and is subject to approval by Spanish antitrust authorities.
On the Toronto Stock Exchange, Domtar's shares closed down 46 cents at $88.66 on Tuesday.