The deal will consist of $600m in cash, with 10% payable on signing, along with assumed liabilities and an “earn-out that will allow PaperlinX to participate in positive earnings growth of the divested options over the next three years.”

PaperlinX will use the sale to reduce its debts to what is believed to be around $340m, with the deal expected to be completed in mid-2009, subject to various approvals.

Assets sold under the deal include the recently-upgraded Maryvale pulp mill and the Shoalhaven mill, though the Tasmanian mills at Burnie and Wesley Vale have not been included.

“The sale of Australian Paper to Nippon Paper establishes its position as an important part of an international paper manufacturer and creates opportunities that would not exist as a stand-alone domestic manufacturing entity,” said PaperlinX managing director Tom Park.

“This divestment is a major step in the transformation of PaperlinX and substantially strengthens our financial profile at a time of volatility and uncertainty in global financial markets,” said PaperlinX chairman David Meiklejohn.

The company has professed its desire to offload Australian Paper for some time.

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