International Paper, the world's largest producer of paper and pulp, has agreed to buy shipping-box company Temple-Inland for $3.7 billion, Bloomberg reports.

Memphis, Tennessee-based International Paper upped their offer for Temple-Inland to $32 a share, the company said in a statement. Originally, Austin, Texas-based Temple-Inland complained that the previous bid of $30.60 was too low, according to Bloomberg.

To fend off the original bid, Temple-Inland adopted what is commonly referred to as a poison pill strategy. The company had limited any group or person from acquiring more than 10 percent of the company stock, according to Bloomberg. Furthermore, given that the company has a staggered board of directors; International Paper would have had a more difficult time gaining control of the board of directors through shareholder voting.

The law firm advising Temple-Inland on the acquisition is Wachtell, Lipton, Rosen and Katz, a prominent New York law firm known as the developers of the poison pill strategy.

In addition, Dow Jones Newswires reports that International Paper will also assume $600 million of Temple-Inland's debt.

The strategic benefits of this combination are clear and we are pleased to be able to move forward on terms that are financially attractive for both sets of shareholders, said International Paper CEO John Faraci in the statement.

The deal is expected to close in the first quarter of 2012.

Temple-Inland shares were up 25.46 percent to $30.90 late Tuesday morning, while stock for International Paper was up 1.94 percent to $25.99.