International Paper (NYSE: IP) has agreed to purchase Weyerhaeuser’s (NYSE: WY) pulp business for $2.2 billion. The deal provides for International Paper to acquire five pulp mills and two converting facilities that produce fluff pulp, softwood pulp, and specialty pulp for a number of consumer applications including diapers, other hygiene products, tissue, and textiles.

Because the transaction is a purchase of assets, International Paper expects to realize a tax benefit with an estimated net present value of $300 million, thus resulting in a net purchase price of $1.9 billion. International Paper forecasts annual synergies of approximately $175 million by the end of 2018, which will require the need for one-time costs of approximately $85 million, the company said.

Weyerhaeuser expects to use a substantial portion of the estimated $1.6 billion after-tax proceeds for repayment of term loans issued in conjunction with the company’s previously announced $2.5 billion share repurchase program.

“Weyerhaeuser’s pulp business has an outstanding customer base served from low-cost, well-run assets that complement our existing system and offers significant synergy opportunities,” said International Paper chairman and CEO Mark Sutton. “This transaction will position us as the premier global supplier of fluff pulp and will enhance our ability to generate additional free cash flow.”

Weyerhaeuser’s pulp business has approximately 1900 employees throughout the U.S. (Mississippi, Georgia, North Carolina), Canada and Poland.

The transaction includes five pulp mills located in Columbus, Miss.; Flint River, Ga.; New Bern, N.C., Port Wentworth, Ga. and Grande Prairie, Alberta, with a combined total capacity of nearly 1.9 million metric tons. The sale also includes two modified fiber mills in Columbus, Miss. and Gdansk, Poland.

The deal completes the first phase of Weyerhaeuser’s strategic review of the Cellulose Fibers business. The transaction with International Paper does not include Weyerhaeuser’s liquid packaging board facility or newsprint and publishing papers joint-venture. Weyerhaeuser’s review of those assets is ongoing.

“This transaction delivers compelling value for Weyerhaeuser shareholders and further focuses our portfolio as we work to be the world’s premier timber, land, and forest products company,” said Doyle R. Simons, president and CEO of Weyerhaeuser.

The acquisition is expected to close in the 4th quarter of 2016, subject to certain closing conditions, primarily the receipt of regulatory approval.

Morgan Stanley & Co. LLC acted as financial advisor to Weyerhaeuser in the transaction.

Weyerhaeuser Co. is one of the world’s largest private owners of timberlands, and operates as a real estate investment trust (REIT). The firm operates under four business segments, timberlands, wood products, cellulose fibers and real estate. It owns timberlands primarily in the U.S and has long-term licenses in Canada. The company is also one of the largest manufacturers of wood and cellulose fiber products, and develops real estate, primarily as a builder of single-family homes. Weyerhaeuser was founded in 1900 and is based in Federal Way, Washington.

In February 2016, Weyerhaeuser merged with Plum Creek Timber Company, Inc. In 2015, Weyerhaeuser and Plum Creek, on a combined basis, generated approximately $8.5 billion in net sales and employed nearly 14 thousand people serving customers worldwide.

International Paper Company operates as a paper and packaging company in North America, Europe, Latin America, Russia, Asia, Africa, and the Middle East. The company operates through three segments: industrial packaging, printing papers, and consumer packaging. The company was founded in 1898 and is headquartered in Memphis, Tennessee.

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