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Unisource & International Paper Sign LOI to Explore Creation of Standalone Distribution Business (Commentary by Cary Sherburne)

Tuesday, April 23, 2013

Press release from the issuing company

NORCROSS, Ga. -- Unisource Worldwide today announced it is engaged in exclusive talks with International Paper regarding a proposed transaction in which its xpedx distribution business would be combined with Unisource. Unisource and xpedx are leading, complementary business-to-business distributors of printing paper, packaging and facility supplies. 

The discussions were initiated after Unisource approached International Paper about the potential business combination, and on April 19, 2013, the parties entered into a non-binding letter of intent to explore a possible transaction. Unisource will continue doing business as usual until a proposed deal is closed. If no transaction is completed, Unisource will remain a private company.

Both Unisource and xpedx are recognized industry leaders that share the goal of serving customers by delivering the quality products and solutions they need, when and where their customers need them. Combining the two businesses would enable an expanded geographic reach to important regions of the world, and further optimize and strengthen the supply chain, resulting in better customer service.

Seth Meisel, a member of the Unisource Board of Directors and a Managing Director at Bain Capital, the majority owner of the Company, said, "Unisource and xpedx serve their markets and customers well. A new company that unites their capabilities can create even more opportunities to deliver value and growth."

Commentary by Cary Sherburne

On April   22nd, 2013, Unisource Worldwide announced that it is engaged in exclusive talks with International Paper regarding a proposed transaction in which its xpedx distribution business would be combined with Unisource. One of our first questions upon reading this was, “Why the announcement now?”  Often, we don’t hear about these deals until due diligence has been completed and the deal is done.  To seek the answer to this and other questions, WhatTheyThink spoke with Al Dragone, the CEO of Unisource Worldwide.

“We have been in these discussions with International Paper since October,” he said, “so the potential transaction has been carefully thought out and vetted.  However, we are at a point in the due diligence process where it was time to make this public.

Dragone also commented on the reason for Unisource approaching IP in the first place, saying, “Both of these companies are successful.  Unisource came through the Great Recession, we are profitable and proud of our position in the marketplace. But we have seen a tremendous consolidation of customers and suppliers in the industry, without a lot of consolidation on the distribution side.  We at Unisource felt that it was a great time to reach out to IP to see if it would make sense to combine the two companies.”

One of the key success factors for an integration of this nature is the compatibility of corporate cultures.  Dragone added, “There is a good match in cultures.  We both have a long history of success with providing solutions to customers. There is also already a lot of cross-pollinization.  If you visit either of the companies, it is hard to walk down the halls without running into someone who was a former employee of the other company.  I think the cultural differences are not great.”

In terms of synergies, Dragone had this to say: “We see a tremendous opportunity for improving the supply chain with this integration.  In many respects, the two companies are mirror images of each other.  In terms of North America, xpedx has a greater presence in Mexico while Unisource has a greater presence in Canada.  We believe that by combining the two, we should be able to service 95% of our North American customers within 24 hours.”

Speaking of synergies, Dragone was quick to say that it is too early to speculate about what the combined organization might look like, although management of the proposed combined companies would come from both companies. “The biggest opportunity right now,” he says, “is to improve solutions for customers between the two companies.  Certainly at some point in time, we will be looking at structure and how best to go to market.  But that is quite a way into the future.”

Dragone believes it will be six to 12 months before the due diligence is completed and a deal can be concluded.

WhatTheyThink will continue to monitor the situation and bring additional news to our readers as it becomes available.



By Pat Berger on Apr 23, 2013

Would this combination create such a dominate force that the Government would step in?


By John Henry on Apr 23, 2013

What a mess it would create. Unisource pretty much walked away from all but the largest printers. Xpedx service has gone to hell the past two years. No one knows your account when you call in the call centers. I buy 90% of papers from other sellers at lower prices with better service. Xpdex in 4 years went from having that 90% to 10%. All this will do is put two big firms who do not "get it" in to one bigger firm who get's it even less. This is a good thing as Lindenmeyr and others will pick the bones of these dinosaurs. The end result is the big paper suppler who thinks they can dictate a market days will end sooner.


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