MEMPHIS, Tenn., March 17, 2008 -- International Paper has signed an agreement with Weyerhaeuser to purchase its Containerboard, Packaging and Recycling (CBPR) business for $6 billion in cash, subject to post-closing adjustments. International Paper expects to close the deal in the third quarter of 2008, subject to customary closing conditions, including regulatory review and receipt of financing.
Because the transaction is a purchase of assets rather than of stock, International Paper will realize a tax benefit that has an estimated net present value of approximately $1.4 billion. Taking this benefit into account, the net purchase price is about $4.6 billion.
"This deal represents a compelling opportunity for International Paper and our shareowners at a very attractive valuation," said Chairman and Chief Executive Officer John Faraci. "Integrating Weyerhaeuser's CBPR business into our North American packaging platform fits very well with our strategy to improve our earnings, cash flow and returns by strengthening existing businesses. We expect the combined packaging business will generate stronger cash flow and higher EBITDA margins than either standalone business."
Carol Roberts, senior vice president of International Paper's packaging business, said she sees low integration risk and considerable upside potential in the deal. "Weyerhaeuser has low-cost, well-run assets that complement our existing mill and converting system and offer significant synergies," she said. "The acquisition expands our geographic presence in the U.S. and Mexico and diversifies our customer base in key product lines. All of this will make our packaging business more competitive, more profitable and better able to serve customers."
International Paper has identified profit improvement opportunities of about $400 million annually from the acquisition. The company expects to achieve at least 40 percent of the improvement within 12 months of completing the deal, with the remainder fully realized by the end of the third year, as a result of reducing duplicate overhead costs, integrating manufacturing operations, optimizing product mix, and improving operational and supply chain efficiencies.
The company projects that the acquisition will be earnings accretive for the 2009 full year. International Paper will finance the transaction through debt and has financing commitments from several leading financial institutions.
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