Packaging Corp. of America (PKG) has agreed to buy packaging and paper products company Boise Inc. (BZ) for about $1.28 billion, a deal that expands Packaging Corp.'s containerboard business.

Boise holders will receive $12.55 a share in cash, a 26% premium to Friday's close. Including Boise's outstanding debt of $714 million, the deal is valued at $1.995 billion. The acquisition, which has been approved by both companies' boards, is expected to close in the fourth quarter.

Boise shares soared 25% to $12.49 in premarket trading. Through Friday's close, the stock is up 25% since the start of the year. Packaging Corp. shares were up 8.4% to $59.15 in premarket trading.

Boise, based in Boise, Idaho, manufactures a variety of packaging and paper products. Its packaging products include linerboard and corrugating medium, corrugated containers and sheets, while its paper products include imaging papers for the office and home, printing and converting papers, and papers used in packaging.

Packaging Corp. Executive Chairman Paul Stecko said the Boise acquisition provides the company with the containerboard it needs to support its strong corrugated products growth.

As a result of the deal, Packaging Corp.'s containerboard capacity will increase 42% to 3.7 million tons while its corrugated products volume will increase by about 30%. Additionally, the company's market presence will expand into the Pacific Northwest. The acquisition is expected to add to earnings immediately.

The combined companies generated $5.5 billion in sales and $879 million in earnings before interest, taxes, depreciation and amortization, excluding special items, in the 12 months ended June 30.

While decent demand for packaging has allowed for increased prices, Boise has been hurt lately by continued weakness in paper sales. Boise's Chair Carl Albert said the company has thoroughly evaluated a range of strategic options and believes this deal is the best way to maximize shareholder value.

Meanwhile, Packaging Corp.'s sales volume and revenue have been helped in recent quarters by strong demand, though the company's bottom line has wrestled against raw-material costs.

Write to Nathalie Tadena at nathalie.tadena@wsj.com

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