Quebec forestry firm Tembec Inc. said Friday it has reached an agreement in principle to buy an Ontario sawmill from U.S. firm Weyerhaeuser for $25.5 million.

The sawmill, located in Chapleau, Ont., employs about 140 people.

The deal is expected to close in the fourth quarter pending certain conditions and regulatory approvals.

Weyerhaeuser acquired the Chapleau sawmill in 1999 as part of its purchase of MacMillan Bloedel Ltd. Norm Bush, Weyerhaeuser's Ontario VP, said the facility is a much better fit with Tembec's operations than it is with Weyerhaeuser.

Tembec CEO Frank Dottori said in a statement that the acquisition is part of his company's strategy related to a "much-needed consolidation in the softwood lumber industry in North America."

He said the mill will provide a secure long-term fibre base for the Marathon pulp joint venture in the area "and allow us to generate additional synergies with our nine existing sawmills in the region, particularly in forest resource management."

The Chapleau sawmill has a production capacity of 100 million board feet of lumber annually. The added production will boost Tembec's annual lumber capacity to more than 1.8 billion board feet, including two Nexfor mills in northwestern Quebec that Tembec intends to acquire by the end of the year.

Also in Ontario, Weyerhaeuser operates a pulp and paper mill at Dryden, a sawmill at Ear Falls, an oriented strand board mill at Wawa and the new Trus Joist TimberStrand plant in Kenora, as well as several sales and customer service centres.