The offer amounts to about C$4.14 for each Stuart Energy share and is a 32 percent premium to the 20-day volume-weighted average price of both companies' shares, they said in a statement.

The board of Stuart Energy, a developer of hydrogen generators, is recommending the offer and shareholders holding 37 percent of its stock have agreed to tender their shares.

The integrated company expects to achieve $8 million in annual cost savings.

Hydrogenics expects to mail the offer in the next two to three weeks and it will remain open for 35 days.

Fuel cells produce electricity by converting hydrogen or a hydrogen-containing fuel into oxygen and water, and are regarded as clean sources of electricity. Auto makers are looking to develop the technology to produce vehicles that are powered by fuel cells rather than simply gasoline or diesel fuel.

Pierre Rivard, president and chief executive of Hydrogenics, said he expects the acquisition of Stuart Energy to expand the company's market and product penetration, and add to revenues, cash reserves and earnings.

After the close of the transaction, Hydrogenics expects to have about $120 million in cash and short-term investments.

Shares of Hydrogenics closed at C$5.59 and Stuart Energy Shares closed at C$2.82 on the Toronto Stock Exchange this week.

Hydrogenics shares have rebounded 22 percent over the past three months, after slumping earlier in the year on weakness in the fuel cell sector.