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International Paper and Ilim Pulp Apply to Russian Federal Antimonopoly Service to Form Joint Venture

Tuesday, March 27, 2007

Press release from the issuing company

ST. PETERSBURG, Russia, March 26 -- International Paper and Ilim Holding announced that they have applied to the Russian Federal Antimonopoly Service (FAS) for approval of the acquisition of rights that will allow the two companies to jointly make decisions regarding the enterprises owned by Ilim Holding SA in Russia. The application was filed today. Obtaining FAS approval presents the next stage toward establishing a joint venture between International Paper and Ilim Pulp. On Oct. 25, 2006, the two companies signed a letter of intent to form the 50-50 joint venture. The joint venture would be established by International Paper purchasing a 50 percent interest in Ilim Holding's stock. The companies intend to close the deal by the end of the second quarter. Ilim Holding operates the three largest Russian pulp-and-paper mills in European Russia and Siberia, and owns a majority share in St. Petersburg KPK in the Leningrad region. Ilim is in the process of consolidating ownership of the mills into a Russian open joint-stock company, Ilim Group, a subsidiary of Ilim Holding. Ilim Group will be managed jointly by a board of directors comprising representatives of Ilim Pulp and International Paper. The new company will be headquartered in St. Petersburg. The joint venture will focus on increasing output of value-added products, such as office papers and packaging, as well as market pulp, in which Ilim Pulp has a leading position in Russia and China. Ilim Pulp's existing wood products business will operate independently of the joint venture, as will International Paper's OAO Svetogorsk business. The prospective partners are currently finalizing a long-term joint investment program of approximately $1.2 billion of capital investments. This unprecedented investment in the Russian forest products industry would be used to upgrade operating subsidiaries, increase production capacity by more than 50 percent, and allow for new, value-added product development.




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