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) -- Georgia-Pacific LLC said Wednesday it plans to acquire

Buckeye Technologies Inc.


in a $1.5 billion cash-and-debt deal aimed at moving the paper products company into new specialty fiber markets.

Terms of the deal call for Georgia-Pacific, a unit of privately-held Koch Industries Inc., to pay $37.50 per share in cash for Memphis-based Buckeye, a premium of 25% over the target's Tuesday close. The price values Buckeye's shares outstanding at about $1.4 billion, with Atlanta-based Georgia-Pacific also taking on some debt in the transaction.

Buckeye was falling 0.5% to $37.66 at mid-day. The shares have gained 18% in the past 12 months. DA Davidson analyst Steven Chercover cut his rating in Buckeye to "underperform" from "buy."

Georgia-Pacific said that it expects to launch a cash tender offer for Buckeye shares, with the deal subject to both regulatory approval and participation of at least 75% of Buckeye shares in the tender.

Buckeye is a maker of fibers and nonwoven materials made from wood and cotton. The company's manufacturing assets include mills in Florida, Tennessee, North Carolina and Germany, and it employs more than 1,200 people from offices in the U.S., Europe and China.

The deal is the second significant purchase for Georgia-Pacific in recent months, following the company's December announcement that it would buy the building products division of Temple-Inland from International Paper Co. for $750 million. The company is a unit of privately held Koch Industries Inc., which acquired Georgia-Pacific Corp. for $21 billion in 2006.

Georgia-Pacific CEO Jim Hannan in a statement said Buckeye's products "strongly complement Georgia-Pacific's existing cellulose business and products" and should help spark growth. "The talented employees, innovation capabilities, advanced technologies, and specialty fibers and nonwovens businesses of Buckeye Technologies will provide a significant platform for continued growth and success," Hannan said.

Buckeye chairman and CEO John Crowe said the deal "enables our stockholders to realize significant value, while also representing an important next step in the growth" of his company. Georgia-Pacific was advised by James Brennan of UBS Securities LLC along with Blackstone Group LP and a Latham & Watkins LLP team including Mark Gerstein, Bradley Faris and Timothy FitzSimmons.

Buckeye received financial advice from Larry Hamdan, Mike Palm, Kristin Healy and Mehmet Ilhan at Barclays plc and legal counsel from a Dechert LLP team including corporate partners Daniel O'Donnell, William Tuttle and Derek Winokur.

Written by Lou Whiteman in Atlanta