Reject Shop (ASX:TRS) and Canada-based retail chain Dollarama entered into a binding transaction implementation deed for the latter to acquire shares in the company in a deal that values the company at AU$259 million, according to a Thursday Australian bourse filing.

The acquisition will be implemented through a scheme of arrangement for AU$6.68 per share in cash, a 112% premium to the company's closing share price of AU$3.15 on Wednesday, the filing said.

The company board recommends that shareholders vote in favor of the proposed transaction in the absence of a superior offer and conditional upon an independent expert supporting Dollarama's offer.

Kin Group, which holds around 20.8% stake, confirmed that it intends to vote in favor of the deal, pending the absence of a superior offer.

As part of the deal, Reject Shop plans to pay a fully franked special dividend of up to AU$0.77 per share before the scheme's implementation, which will be deducted from the A$6.68 cash consideration.

A break fee of AU$2.6 million may be payable to Dollarama if Reject Shop terminates the agreement for a superior offer.

Reject Shop's shareholders will decide during a meeting expected to be held in June, the filing said.