The sale consists of $600m in cash, with 10% payable on signing, although it is conditional on the approval of lenders. Cash proceeds from the sale will be applied to reduce debt.

Paperlinx chairman David Meiklejohn said the sale is a major step in the transformation of the company.

"It substantially strengthens our financial profile at a time of volatility and uncertainty in global economic markets," he said.

"The board believes this transaction is in the best interests of the company and its shareholders."

Paperlinx will now sharpen its focus on its merchanting and distribution, with a completion of the sale expected to be announced by mid 2009.

The sale excludes its two Tasmanian mills at Burnie and Wesley Vale, but a review of these operations will be completed over the next few months that could see the sites sold or closed.

Paperlinx will record a write-down of around $600m in relation to the sale. The company's interim results announcement will be delayed until 27 February.