UPDATE 1-Domtar signs deal to buy back shares worth $150 million

(Follows Alerts)

May 12 (Reuters) - Canadian paper maker Domtar Corp said it has entered an agreement with a third party to buy back $150 million worth of common stock with available cash on hand.

According to the accelerated share repurchase agreement, the Montreal-based company will initially repurchase 1.29 million shares, or 3 percent of its public float.

The final number of shares repurchased will be at a discount to the stock's daily volume-weighted average price during a valuation period, which may vary from one to three months, Domtar said in a statement.

Last week, Domtar had raised its share repurchase program to $600 million, from $150 million. [ID:nASA0227Z]

Shares of Domtar were trading up 29 Canadian cents at C$100.57 on Thursday on the Toronto Stock Exchange. Its New York listed shares were trading slightly up at $104.33. (Reporting by Arnika Thakur in Bangalore; Editing by Roshni Menon)