Quebec furniture maker Bermex International Inc. is buying bankrupt Shermag Inc. at undisclosed terms, according to Shermag's board of directors.

Bermex, which makes furniture in Quebec, will receive all of Shermag's shares while assuming a portion of the failed company's outstanding debt.

Shermag, which makes furniture in Sherbrooke, Que., slid into bankruptcy in May 2008 when falling demand for its bedroom and dining room products hurt the company's ability to cover its debt payments.

In its last public financial statements, Shermag had slightly more than $20 million in long-term debt.

Bermex, which makes dining room chairs and tables as well as other types of casual furniture, has not said how it will integrate Shermag's operations or whether there will be any job cuts.

Founded in 1983, Bermex has 575 workers while Shermag has 265 employees at last count.

The offer must be accepted by the Quebec Superior Court, which has been overseeing Shermag since it obtained protection from creditors about a year ago. Bermex's plan of arrangement will detail how much creditors would recover.

The court also has given Bermex until the first week of August to finalize details of its takeover of Shermag and for the bankrupt furniture maker to secure interim financing.

The deal is expected to close in October.

Shermag has been kept afloat by funding from Geosam Investments Ltd., a private company headed by activist investor George Armoyan.

Armoyan, who resigned from the Shermag board earlier this spring, is also the chief executive of Clarke Inc., the Halifax-based activist investment firm which owns about 20 per cent of the Sherbrooke furniture maker.

Clarke made a buyout bid for Shermag in February 2008 but had that offer rejected by Shermag's board.

With files from The Canadian Press