Sept. 23 (Bloomberg) -- Votorantim Celulose e Papel SA, Brazil's third-largest pulp and paper maker, will borrow $1.8 billion from JPMorgan Chase & Co. to help fund the acquisition of Aracruz Celulose SA shares.

Conditions of the loan, agreed to in a commitment letter, will be established when the contract is signed, Sao Paulo-based VCP said today in a statement to Brazil's securities regulator. VCP said it has about $500 million of liquid assets on hand.

VCP, seeking to merge operations with Aracruz to grab a third of the world's eucalyptus-pulp market, last month agreed to pay 2.71 billion reais ($1.5 billion) to double its stake in the rival. VCP and Aracruz shareholders this month agreed to the merger to cut costs and gain global market share.

Third-quarter pulp sales will decline 2 percent after maintenance work pared output, slipping to about 260,000 metric tons, VCP also said in the statement. The company's paper sales will drop 9 percent from a year earlier to about 109,000 tons.

A weaker Brazilian currency will offset falling international pulp prices, VCP said.

VCP dropped 27 centavos, or 0.7 percent, to 35.81 reais at 12:17 p.m. in Sao Paulo trading. The shares have fallen 32 percent in the past year. Aracruz was unchanged at 8.66 reais. The shares have plunged 34 percent in the past year.

To contact the reporter on this story: Carlos Caminada in Sao Paulo at at ccaminada1@bloomberg.net

Last Updated: September 23, 2008 11:20 EDT