CHAPEL HILL - The Forestland Group is harvesting the largest timberland acquisition in its 10-year history.

Forestland, the second largest timber investment management organization, or TIMO, in the United States, has made a $465 million offer to buy the Anderson-Tully Co. of Memphis, Tenn.

Anderson-Tully is a real estate investment trust that owns more than 323,000 acres of hardwood timber in four states. It's also the largest hardwood sawmill operator in North America.

The transaction is expected to close early this year.

Forestland would acquire all of the outstanding shares of Anderson-Tully for about $500,000 per common share in cash. About 180 shareholders collectively hold fewer than 1,000 shares of Anderson-Tully's stock.

Forestland specializes in investing in and managing hardwoods and pine forests for institutional, family and individual investors. The Chapel Hill company owns more than 1.8 million acres in 16 U.S. states stretching from as far north as Maine and as far west as Texas.

While Forestland has managed land and sold the timber, the Anderson-Tully acquisition would move it into the milling of lumber, veneer and residential flooring. Anderson-Tully, which was founded in 1889, employs about 350 people in Vicksburg, Miss., and in Memphis, Tenn., mostly to operate its sawmills, dry kilns, veneer mill and planer mill. It reported revenue of $95 million in 2004.

Chris Zinkhan, managing director of Forestland, did not return calls for comment, but he was quoted in an October press release as saying he doesn't anticipate major changes in the Anderson-Tully business following the acquisition. "The existing synergy between its Vicksburg sawmills, worldwide marketing organization and timberlands are important elements to the overall business value," he said.

Anderson-Tully also operates sales offices in Italy, Mexico, China and Vietnam. In January 2004, Anderson-Tully sold its Engineered Wood Division in Vicksburg to a Mississippi investment group but continues to operate a veneer mill. The company sold two distribution warehouses in Memphis in early January for $15.3 million. President and Chief Executive Officer Chip Dickinson was unavailable for comment.

Since 1995, Forestland has put together five investment funds, and the Anderson-Tully deal would be the largest acquisition made by the company. Forestland reported in early 2005 that it had raised $575 million for its fifth Heartwood Forestland Fund. In December, Forestland filed incorporation papers in North Carolina for Heartwood Forestland Fund V Side Fund II LP.

The only major deal so far completed out of the fifth fund is the purchase of 240,000 acres of timberland in Maine for $80.5 million from Fraser Papers in May.

The Forestland Group is second only to Hancock Timber Resource Group of Boston in terms of assets and acres, according to Timber Mart-South, a trade publication for the timber industry affiliated with the University of Georgia's Warnell School of Forest Resources. Hancock manages 3.3 million acres of timberland with a value of $4.8 billion, including a $1.7 billion acquisition of 930,000 acres from Harvard Management Co. in October.

The 20 largest TIMOs in the country own about 13 million acres of U.S. timberland, according to Forestland research.

Tom Harris, publisher of Timber Mart-South, says all TIMOs have been more active over the past few years because paper manufacturers such as International Paper and Weyerhaeuser Co. have been putting hundreds of thousands of acres across the country on the sale block.

Motivated by glutted markets, rising taxes and ownership costs, paper manufacturers are preferring to move timber assets off their books and buy the wood they need.