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Domtar's president and CEO John Williams speaks to the media following the pulp and paper company's annual shareholders meeting in the Montreal, May 4, 2011.

SHAUN BEST/REUTERS

Paper-maker Domtar Corp. is broadening its presence in the personal care products market with a $272-million (U.S.) deal to buy the largest maker of store-brand infant diapers in the United States.

Montreal-based Domtar said on Tuesday it has struck a definitive agreement for the acquisition of Associated Hygienic Products from DSG International.

Domtar first broke into the consumer products area in 2011 with the purchase of Greenville, N.C.-based Attends Healthcare Inc., a manufacturer of incontinence undergarments and other products.

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The diversification into consumer products is part of the office-paper maker's strategy to smooth out the bumps in the cyclical pulp and paper business.

Domtar is also able to supply the personal care division with its own pulp.

"The market for store brand infant diapers is growing steadily in North America driven by high quality products and a strong value proposition. The acquisition of AHP will provide meaningful market expansion opportunities and innovative product development capabilities with our existing personal care business business, as well as synergies to the bottom line," Domtar president and chief executive officer John Williams said in a news release.

This is Domtar's fourth transaction in personal care in two years and the division is expected to reach over $200-million in annualized EBITDA (earnings before interest, taxes, depreciation and amortization) by 2017, he said.

AHP has two facilities, one in Delaware, Ohio, and the other in Waco, Texas; it employs 621 people and has annual sales in the $320-million range, said Domtar.

Domtar says it expects to realize annual cost savings of $10-million within two years.

The AHP deal is expected to close by the end of the second quarter of 2013.

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"This acquisition will add a key product line to our offering, a competitive manufacturing base to our existing footprint and solid access to the retail channels for our adult incontinence products," said senior vice-president for personal care Michael Fagan.

Almost two years ago, Domtar agreed to pay $315-million -- including about $100-million in debt-assumption -- to acquire Attends from New York private-equity fund KPS Capital Partners LP.

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