International Paper (IP) - Get Report said Tuesday that it entered into an agreement with Votorantim Celulose e Papel to swap paper mills in order to expand its Brazilian footprint.

It says it will exchange its pulp mill project being developed in the state of Mato Grosso do Sul (along with about 100,000 hectares of surrounding forestlands) for VCP's Luiz Antonio pulp and uncoated paper mill and about 60,000 hectares of forestlands located in the state of Sao Paulo.

IP will fund the Tres Lagoas pulp mill project in the amount of $1.15 billion.

After the exchange, VCP will own and operate a 1.1 million metric-ton pulp mill at Tres Lagoas.

The transaction, expected to close by Feb. 1, 2007, is part of International Paper's previously announced transformation to focus on uncoated papers and industrial and consumer packaging worldwide.

"International Paper's Brazil operations are an important base for the company and this is an opportunity to expand our position in regional markets while capitalizing on one of the world's lowest-cost manufacturing environments," the Memphis, Tenn.-based company said.

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