8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C.  20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):  December 18, 2007

MERCER INTERNATIONAL INC.

(Exact name of Registrant as specified in its charter)

Washington

(State or other jurisdiction of incorporation or organization)

000-51826                                                                      47-0956945

            (Commission File Number)                                        (I.R.S. Employer Identification No.)

Suite 2840, 650 West Georgia Street, Vancouver, British Columbia, Canada  V6B 4N8

(Address of Office)

(604) 684-1099

(Registrant's telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ITEM 7.01 REGULATION FD DISCLOSURE

On December 18, 2007, Mercer International Inc. ("Mercer") responded to a letter from Mass Financial Corp. ("Mass") dated December 10, 2007.  A copy of the letter from Mercer is attached hereto as Exhibit 99.1 and a copy of the letter from Mass is attached hereto as Exhibit 99.2.

The information contained in this Current Report shall not be deemed to be "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934 (the "Exchange Act") or otherwise subject to the liabilities of that section, nor shall it be incorporated by reference into a filing under the Securities Act of 1933, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS

Exhibit No.	Description
99.1	Letter from Mercer International Inc. to Mass Financial Corp. dated December 18, 2007
99.2	Letter from Mass Financial Corp. to Mercer International Inc. dated December 10, 2007

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

MERCER INTERNATIONAL INC.

/s/ David M. Gandossi

David M. Gandossi

Chief Financial Officer

Date:  December 18, 2007

MERCER INTERNATIONAL INC.

FORM 8-K

EXHIBIT INDEX

Exhibit No.	Description
99.1	Letter from Mercer International Inc. to Mass Financial Corp. dated December 18, 2007
99.2	Letter from Mass Financial Corp. to Mercer International Inc. dated December 10, 2007

EX-99.1

MERCER INTERNATIONAL INC.

December 18, 2007

Michael J. Smith

Mass Financial Corp.

Suite 803, 8^th Floor

Dina House, Ruttonjee Centre

11 Duddell Street, Central

Hong Kong

Dear Mr. Smith:

Re:  Mass Financial Corp. ("Mass")

I am writing on behalf of the Board of Directors of Mercer in reply to your letter of December 10, 2007.  We note that, since the start of 2006, this is about the 35^th letter or correspondence from you and your agents under the names of various off-shore and foreign entities controlled by or affiliated with you.  Your latest letter is under Mass letterhead which we understand is a Barbados company headquartered in China, traded on the "pink sheets" in the United States and neither listed on any stock exchange nor subject to the reporting requirements of the Securities Exchange Act of 1934.

Our Governance Committee and independent directors have met, carefully considered and disagree with the matters set out in your letter.  While we do not believe it useful or necessary to respond to every point in your letter, we would like to point out the following:

Results of Operations.  Contrary to your statement that we suffered an operating loss from pulp operations of €10 million in the nine-months ending September 30, 2007, we in fact reported net income from continuing operations of €15.1 million for such period as set out in our quarterly report.  Our earnings are impacted by the weakness of the U.S. dollar relative to the Euro and Canadian dollar.  As you know, pulp prices are quoted in U.S. dollars, while the majority of softwood market pulp producers' operating costs are principally incurred in Euros and Canadian dollars.  This U.S. dollar weakness has contributed to narrower margins for most softwood pulp producers.  Partially offsetting the narrowing of margins resulting from a weakening U.S. dollar is the converse effect of foreign exchange gains reported by many industry participants.

Indebtedness.  Your letter makes reference to our level of indebtedness.  As you are aware and as set out in our public reports, approximately two-thirds of our long-term indebtedness relates to the project financing for the Stendal pulp mill which is non-recourse to Mercer. This permits us to finance Mercer and access the debt markets excluding the effect of such Stendal debt.  Also, the Stendal project debt is 80% guaranteed by state and federal governments in Germany.  As a result, it benefits from favourable rates of interest, maturity and other terms.  Further, with respect to the assets supporting Mercer's indebtedness, the Stendal mill received over €274 million in governmental grants which, under GAAP, reduced the balance sheet carrying value of the Stendal pulp mill by an equivalent amount. Excluding the Stendal debt, we believe that the credit performance of Mercer and its restricted group pursuant to the terms of our 9¼% senior notes has been strong.

Executive Compensation.  The Board disagrees that executive compensation at Mercer is too high.  Mercer has established a Compensation Committee composed entirely of independent directors.  The Compensation Committee, among other things, reviews and approves Mercer's compensation and benefits for executive officers in accordance with an established protocol. Further, our Board has several members who each have over 20 years experience with forest products companies with similar market capitalizations as Mercer and are familiar with their compensation practices. Mercer's compensation philosophy for executive officers is principally performance based and its principal objectives are to:  (i) secure and retain the services of qualified executive officers; and (ii) create an environment in which its executive officers are motivated to achieve and maintain superior performance levels.

The Board believes that Mercer's compensation structure operates effectively to achieve such objectives. Our Compensation Committee also considers and evaluates executive compensation levels and programs through comparisons on an annual basis, based on available information for "peer group" companies as well as other companies with which it competes for executive talent.  The peer group companies are principally comprised of "mid cap" North American forest product companies.  Mercer believes that its compensation levels fairly reflect its performance where appropriate, relative to its peer companies.  Finally, Mercer's Compensation Committee is in the process of finalizing a performance based long-term incentive plan.  We hope to be in a position to announce the same shortly.

Marketing Activities.  With respect to your reference to the Mercer Pulp Porsche Event in 2007, Mercer invited 40 major customers to the event.  The 20 customers that attended the event currently purchase close to half of the annual amount of pulp sold by Mercer.  Mercer believes that the event provides an effective tool for building customer relationships and provides good value for the cost involved.  Mercer will continue to consider hosting such events or other marketing based initiatives, as it believes effective from time to time.

Approach from a Chinese Company.  In your letter you reference some unnamed "Chinese company" with whom you are familiar and advise that it approached "our Germany managing director about a business combination on at least two occasions and was told Mercer has no interest".  The Board was not approached with any such proposal.  The Board has been and is always willing to entertain any proposal that may enhance shareholder value.  If you are aware of any such bona fide proposal, please direct the interested party to myself or any other member of the Board.

Short Interest.  While we have not yet reviewed in-depth the short interest in our shares, we do note that it is common practice for companies that have issued convertible securities (such as our 8.5% convertible notes) to have a short interest built up as holders lock in gains on such convertible securities.

Mass's Proposals.  We respond to each of your proposals in the order set out in your letter as follows:

1.   You requested an immediate reduction of executive compensation by a factor of 40%.  For the reasons outlined above, the Board believes that such a reduction in executive compensation is not appropriate, would be harmful to Mercer and its shareholders and would unduly expose it to legal claims for unlawful constructive dismissal.  We note that the most recent Institutional Shareholders Services Inc. ("ISS") Mercer Proxy Report disclosed that the total compensation payable to Mercer's Chief Executive Officer fell well below the median amount payable by Mercer's peer group participants.

2.   In response to your request that Mercer hire the most qualified independent investment bankers, excluding the Royal Bank of Canada, please be advised that Mercer has no ongoing commitments to any investment bank.  Mercer will select its bankers, from time to time, based upon its then current requirements and the specific expertise offered by the banks to be retained.

3.   In response to your suggestion that Mercer cancel its directors' and officers' liability insurance policy, the Board believes that doing so would be imprudent, serve no useful business purpose, be contrary to customary public company practice and counter-productive to Mercer's ongoing requirement to retain the services of qualified directors and executive officers.

4.   In response to your request that a "special audit" of expense accounts of senior operating management be conducted, we advise that our Audit Committee is mandated to review senior management expense reports of the Chairman, Chief Executive Officer and Chief Financial Officer of Mercer on at least an annual basis and does so.  Accordingly, a special audit is not required.

5.   In response to your request that Mercer "upgrade the Audit Committee with additional qualified members", the Board is satisfied with the current constitution of the Audit Committee.  Two of the members meet the definition of "Financial Expert" within the meaning of such term under the Sarbanes-Oxley Act of 2002.  Each Committee member is independent under applicable laws and regulations and the listing requirements of the NASDAQ and each has the necessary experience to fulfil his duties.

6.   In response to your request that all directors' fees and options be cancelled, we refer you to our previous responses relating to compensation matters.

Mass's Share Interest.  Your letter states Mass owns 700,000 shares of Mercer.  We expect this position was acquired sometime after October 2006 from a wholly owned subsidiary of KHD Humboldt Wedag International Ltd. (formerly called "MFC Bancorp Ltd.", "Arbatax International Ltd.", "Nalcap Holdings Ltd.", "Canadian Javelin Ltd.") ("MFC").  These shares were initially issued by Mercer to an MFC affiliate in consideration for purchasing its 7% interest in the Stendal pulp mill in Germany (the "Stendal Minority Acquisition") in late 2006.  We expect such MFC affiliate has now somehow subsequently transferred the same to Mass.  In any event, the Stendal Minority Acquisition was negotiated and settled directly with you and I am surprised that you now choose to voice concerns regarding Mercer's capital structure, given that you were fully aware of the same at the time that all relevant investment decisions were made and that you are the senior executive, director and chairman of both MFC and Mass.

We trust that the responses set out herein address your concerns.  However, if you wish to further discuss any matter, please contact me by telephone or, if you prefer, we could arrange a meeting at a mutually satisfactory time.

Yours truly,

MERCER INTERNATIONAL INC.

/s/ Ken Shields

Per:

Ken Shields

Deputy Chairman and Lead Director

EX-99.2

 

December 10, 2007

Board of Directors

Mercer International Inc.

2840 - 650 West Georgia Street

Vancouver, B.C., Canada

Dear Sirs:

Let me first clearly state that as a substantial shareholder we believe our company has one of the most modern pulp production facilities in the world, and should be capable of producing some of the highest returns in the industry for its shareholders.  Instead, despite its world class assets, since inception it has yet to produce positive earnings from pulp production.  Despite the highest pulp prices for the past 12 years, your YTD September 30, 2007 income statement shows an operating loss from pulp operations of €10 million.  To achieve even this unacceptable return on over €1 billion of capital assets required your booking a deferred tax benefit of €7 million in Q3.  Any net income reported in recent years has been mostly the result of non-cash gains from derivatives related to its long term debt, offset against realized operating losses.  As a result little, if any, positive cash flow has been generated from these earnings.

Your company is weak, with minimal equity (i.e. total debt to equity ratio of 3.8 to 1 at Q3, 2007), and you have a limited ability to accumulate cash reserves in order to protect the company from any adverse market events or pay a dividend to your fellow shareholders.  The Board seems to rely solely on NBSK pulp prices continuing to rise while input costs remain constant or decrease or the closure of existingproduction facilities by competitors for your future.  This was confirmed by your Chairman in the company's conference call.  This approach to business is wishful thinking, as opposed to a well reasoned business plan.  Recent market reaction to highly leveraged companies is negative, which can only further deteriorate Mercer's position if a much needed restructuring or sale is not immediately undertaken by the company.

Recent valuations of Mercer published by analysts at RBC Capital Markets Research and D.A. Davidson & Co. give target prices of US$12.00 to US$14.00 per share, while other institutions believe it is in the range of US$16 to $18.5 per share.  Mercer has been unable to achieve a respectable share price due to its lack of earnings year after year, because of our debt load and excessive administration costs.

You now offer nothing to shareholders but promises of higher sales, better future earnings, lower capital expenditures, and lower production costs quarter after quarter.  After all of these years, you have yet to either show or realistically explain how you will deliver these results.

The investing market is losing faith.  Look at the short interest in our shares, the position is very high and has almost doubled in the past twelve months.

The executive's compensation is very high, perks, annual cash bonuses, stock awards, pension plans, luxury cars, expense account and golden parachutes in the event of dismissal or a change in control of the company is dismal.  This is further exacerbated by fiscally irresponsible and extravagant spending, such as, where clients and friends of management enjoyed the Mercer Pulp Porsche Cup Event held over a weekend at the Porsche race track in Leipzig, Germany in September, 2006 and again on in 2007.  Why?

It needs a restructuring plan in order to generate positive operational cash flow: project growth based on new strategic alliance or sale.  Look at the case ofInternational Paper (IP/OW) which is well positioned to benefit from higher long-term pulp prices, given its recent joint venture in Russia with llim Pulp.

In addition, it is our opinion Mercer should take advantage of the growing Chinese demands.  The Chinese economy is to grow at a trend rate in excess of 11% p.a., translating into very strong pulp demand.  Given China's lack of natural resources, one of its major paper manufactures will be an ideal candidate as a strategic investor or buyer.

We do not understand why one of the Chinese companies who we are very familiar with spoke to our Germany managing director about a business combination on at least two occasions and was told Mercer has no interest.

As a very concerned shareholder we currently own over 700,000 shares and personally I have a stake in excess of another 600,000 shares.  Mercer needs to refocus on creating value for its shareholders not its management, and we respectively request that it begin immediately with a Board of Directors whose mandate is increasing shareholder value only.  This Board should:

1. Reduce executive compensation by 40% and tie any future bonuses to net operating income from pulp production and payable in common shares.  (send back all of the luxury cars)

2. Hire the most qualified, independent investment bankers (not The Royal Bank of Canada, personal friend of management) with knowledge of the pulp industry to advise on selling our company or joint venture to a strategic investor in order to realize the highest value for shareholders.

3. Cancel your directors and officers liability insurance.

4. Conduct a special audit of the expenses accounts of your senior, operating management and audit committee with a mandate to confirm all expenses are correct.

5. Upgrade your Audit Committee with additional qualified members.

6. Cancel your Director's fees and options until profitability on an earning per share basis occurs.

Your positive ^-response to the above is requested by December 18, 2007 outlining the action the Board of Directors has decided to take.  If I have not received any clear response, I assume it is your same answer you gave the Chinese.

Please listen, as we all have the same agenda.  Please read very carefully with the greatest concerns you can muster.  Please, it's now time for the shareholders to make money.

Michael J. Smith

President

P.S. This letter will be kept confidential until December 18, 2007.