New Flyer Industries Inc. announced a deal Wednesday that will see Brazilian company Marcopolo SA buy a nearly 20 per cent stake in the Manitoba-based transit bus manufacturer for $116 million.

Under the deal, Marcopolo will pay $10.50 per share for nearly 11.1 million shares in New Flyer, a roughly 19.99 per cent stake.

The two companies also signed an agreement to explore opportunities to co-operate on engineering, technical, purchasing and operational matters.

Marcopolo is one of the world's largest bus manufacturers.

New Flyer, with operations in Canada and the United States, says it plans to use the Marcopolo investment to support its growth and diversification.

The share issue price is a 20 per cent premium to the 30 day volume-weighted average trading price for the period ended Jan. 23, New Flyer said.

Under the deal, just over 4.9 million common shares will be issued to Marcopolo upon closing, expected by March 1, for C$51.7 million.

The rest of the shares are to be issued to Marcopolo at the same price per share in one tranche over the next 12 months as determined by New Flyer "based on its investment and financing needs and in certain other circumstances."

"Marcopolo is a world-class company with extensive technology, expertise and experience and we look forward to working with them to take New Flyer to the next level," president and CEO Paul Soubry said in making the announcement.

"This investment will allow us to be more aggressive in executing our growth, diversification and new product development agenda while giving us timing flexibility in drawing the second portion of the funds to ensure that the additional dividend requirements can be better matched to cash flows generated from the use of those funds."

Marcopolo CEO Jose Rubens de la Rosa said the investment is in line with Marcopolo's growth strategy and marks its definitive entry into the U.S. and Canadian markets, " two of the most sophisticated and advanced in the world."

The investment allows Marcopolo to nominate a member to the New Flyer board as long as it still holds a 10 per cent stake and grants Marcopolo rights to maintain its interest in New Flyer.

Meanwhile, Marcopolo has agreed to certain restrictions including a requirement to hold the shares it acquires for at least two years and a restriction on acquisition of additional New Flyer securities and certain other actions for a period of at least two years.

Shares in New Flyer, which announced the deal after the close of markets Wednesday, were down five cents at $9.40 on the Toronto Stock Exchange on Wednesday.