MEMPHIS, Tenn. (AP) – International Paper announced Thursday it is buying back up to $3 billion of its shares.

The company estimated the buyback would entail about 20 percent of company’s 492.9 million outstanding shares based on Wednesday’s close of $32.12. The repurchase will begin in the third quarter and should be completed before the end of 2007, International Paper officials said in a news release.

International Paper is selling its plants in Jay and Bucksport to Purchase, N.Y.-based investment firm Apollo Management. The two mills, along with facilities in Michigan and Minnesotta, will operate under the name Verso Paper Holdings LLC.

The world’s largest paper company began a transformation plan last year that includes selling millions of acres of Brazilian forest land and some of its businesses and relocating its headquarters from Stamford, Conn., to Memphis.

“In addition to returning value to our shareowners through the share repurchase, we are reducing debt to strengthen our balance sheet and we are exploring attractive reinvestment opportunities that will improve our global uncoated paper and packaging businesses,” Chairman and CEO John Faraci said in a news release.

International Paper said it plans to spend $6 billion to $7 billion on repayment of its $11.5 billion debt and voluntary cash contributions of up to $1 billion to its U.S. pension fund.

Annual interest payments could be cut by about $350 million, Faraci said.

The company is investigating selling its beverage packaging, wood products and Arizona Chemical businesses and its Inpacel assets in Brazil. Most of those decisions will be made within 90 days, officials said.

The company said the divestitures could bring in more than $11 billion depending on market conditions.

Shares of International Paper were up 4 cents to $32.16 in afternoon trading on the New York Stock Exchange. The stock has traded between $26.97 and $37.98 over the past year.

Faraci has said the company expects a seasonally stronger performance when second-quarter earnings are released Aug. 1.

Analysts have forecast earnings of 33 cents per share, up from 31 cents in the second quarter of 2005.

The company reported a $1.2 billion loss in the first quarter because of charges for selling off some assets and a small gain in revenue, to $5.7 billion from $5.6 billion last year.