The deal, which is expected to close by the end of 2012, came together after a Labor Day weekend meeting between IP chief executive John Faraci and Temple counterpart Doyle Simons.
Simons opened Temple’s books to Faraci – something he had refused to do since the IP offer was made public in June and IP went hostile in July.
IP initially offered $30.60 per share, an amount that Temple had repeatedly said was too low.
After reviewing Temple’s numbers, Faraci and the rest of IP’s board voted on Monday night to boost the offer to $32 per share, roughly $3.7bn.
IP will assume $600m in Temple’s debt.
The deal averts a prolonged hostile bid process, which likely never would have succeeded given Temple’s poison pill defence.
“We concluded that we were ready, willing and able to offer $32 per share and still remain highly confident that we had an accretive, strategic and financially attractive acquisition,” Faraci said.
Temple makes corrugated packaging, which is used to make shipping boxes. When the deal closes, International Paper will be able to consolidate pricing power by controlling roughly 40 per cent of the corrugated industry.