IP said that it would buy 53.5 percent of APPM from parent LN Bangur group for $257 million in cash, and make a public offer an additional 21.5 percent of APPM's shares for $104 million.

In addition, it agreed to a $62 million non-compete payment to the sellers, taking the deal's potential value to $423 million.

"Once completed, the transaction will position International Paper as the first global paper and packaging company with a significant position in India's fast-growing economy," the Memphis, Tennessee-based company said in a statement.

John Faraci, chairman and chief executive of International Paper, said that APPM is "an excellent platform" for IP to expand in the Indian market.

"Both APPM and the India paper and packaging industry are growing at substantial rates, and we believe that IP's global operations and technical expertise can accelerate that growth and create value for customers as well as IP and APPM shareholders," Faraci said in the statement.

APPM is a leading integrated paper manufacturer in India. Its existing management team and 2,500 employees will continue to operate the business, the statement said.

LN Bangur, executive chairman of the Bangur Group, said that IP brings a different set of resources and capabilities needed for the unit's next phase of growth.

"International Paper is the right company to take the business forward.