BOSTON (Reuters) - Bermuda registered conglomerate Tyco International Ltd. said it plans to buy diaper maker Paragon Trade Brands Inc., which emerged from bankruptcy protection last year, for $650 million, expanding its health-care unit's line of absorbent personal-care products.

Norcross, Georgia-based Paragon annually sells billions of private-label disposable diapers and training pants to grocery stores, warehouse clubs, toy stores and drugstores throughout North America. Wal-Mart Stores Inc. is a big customer.

Tyco said the deal will immediately add to earnings and cash flow. During the past several years, Tyco has been an aggressive corporate buyer, spending about $65 billion in stock and cash to bolster its businesses, ranging from fire and security protection to electronics and disposable medical products. Paragon said the deal ends an evaluation of strategic alternatives by majority shareholder Wellspring Capital Management LLC. An investment group led by Wellspring owns 97 percent of Paragon.

"We believe that the size and strength of Tyco will allow our business to continue to grow to a degree even beyond what we have been able to accomplish," Paragon Chairman and Chief Executive Michael Riordan said in a statement.

The deal includes $521.8 million in cash, plus warrants and net debt. The agreement, which is subject to regulatory review, values Paragon at $43.50 per share, a premium of nearly 33 percent over its closing stock price of $32.75 on November 29. Paragon had close to 12 million shares outstanding at September 30, according to the company.

Paragon stock jumped $10 to $42.75 on the OTC Bulletin Board, while Tyco shares fell 42 cents to $58.38 on the New York Stock Exchange. Tyco, which manages operations from Exeter, New Hampshire, said it will call all of Paragon's outstanding warrants in accordance with the terms of those warrants.

Paragon sought Chapter 11 bankruptcy protection in 1998 and successfully emerged as a reorganised company in January 2000.