The company (TSX:UFS) said Friday it will add Xerox's (NYSE:XRX) branded papers and specialty products to its own offerings, but declined to provide many other details about the deal, except that it would be paid for with cash on hand.
Xerox said it sells about US$275 million worth of paper annually at very low margins.
Domtar CEO John Williams said the Xerox brand is well regarded in the markets it serves.
"This deal brings together Xerox's branded papers with Domtar's already comprehensive paper offering and will allow us to better serve our customers," he said in a news release.
Known mainly for photocopiers, Xerox doesn't make its branded paper. Instead, it uses a number of producers across North America including Domtar and reportedly Resolute Forest Products (TSX:RFP).
U.S.-based Xerox said it decided to sell the paper business to an industry leader as it focuses more on services and document technology.
Xerox company spokesman John Quinn said the sale will have an impact on about 75 Xerox employees across North America, including 20 to 25 sales and support workers located primarily in Toronto.
Quinn said it has started the process to determine how many will become part of Domtar's operations.
After the deal closes 90 per cent of the paper will be produced by Domtar, while 10 per cent of very low-volume specialty papers are under evaluation, he added.
Xerox sells a range of coated and uncoated papers, and specialty products including business forms and wide-format paper. It will continue to manufacture and sell toner, ink and Xerox replacement cartridges.
The sale is expected to close in the second quarter, subject to normal closing conditions.
Domtar manufactures, markets and distributes communication papers, specialty and packaging papers and adult incontinence products.
Its shares closed up 18 cents at $79.55 on the Toronto Stock Exchange on Friday.