HELSINKI (AFP) - Finnish paper maker UPM said Tuesday it was acquiring magazine paper maker Myllykoski, a family-owned business worth 900 million euros (1.2 billion dollars).

"With this transaction, we create the conditions needed for improving UPM's cash flow and mid-term profitability," UPM's CEO Jussi Pesonen said in a statement.

Negotiations between the two companies have been closely watched for months, and a deal was expected to be made before the end of this year.

"Following the transaction, UPM Group's balance sheet assets will increase by approximately 1.6 billion euros (2.1 billion dollars)," UPM said, adding that the deal is expected to boost the company's cash flow in the second half of 2011, positively impacting earnings per share in 2012.

Beginning in 2012, the company also expects to see "synergy benefits" in excess of 100 million euros a year.

UPM's Board of Directors decided to issue five million new UPM shares to finance the acquisition of Myllykoski.

UPM is the world's leading maker of magazine paper, with business units also in energy and pulp and engineered materials.

Myllykoski is a family-owned business which operates seven paper mills in Finland, Germany, and the United States, with a total annual capacity of close to three million tonnes.