International Paper to acquire Weyerhaeuser’s pulp business

SPOKANE (Scrap Monster):  In a major acquisition deal, International Paper Co. will purchase the pulp business owned by Weyerhaeuser Co. The $2.2 billion cash deal is subject to closing conditions including a regulatory review and is expected to close during the last quarter of 2016.

The sale of assets is the end-result of the recent review by Weyerhaeuser Co. on its cellulose fibers business. The board of directors of the company had announced strategic review of its pulp business during November last year. Following this the company held negotiations with several interested parties regarding sale of the mills and has finally decided to strike a deal with the pulp and paper major International Paper Co.

What is covered by the deal and what not?

The purchase deal includes five pulps mills located in Columbus, Miss., Flint River, Ga., New Bern, N.C., Port Wentworth, Ga., and Grande Prairie. These five pulp mills employ around 1,900 workers and have a combined production capacity of nearly 1.9 million metric tons. The deal also includes two converting facilities in Columbus, and Gdansk, Poland. However, the deal does not include Weyerhaeuser’s liquid packaging-board facility or newsprint and publishing papers joint venture.

What the deal means to concerned parties?

For Weyerhaeuser, the deal is expected to boost the company’s efforts to become the world’s premier timber, land, and forest-products company. It is in alignment with the company’s strategic review policy that suggests focusing basically on the wood products materials and mills in the US and Canada.

According to International Paper Chief Executive Mark Sutton, the purchase transaction will help to generate additional cash flows. Further, it will position International Paper Co. as the premium global supplier of fluff pulp, which is used in the manufacture of hygiene products such as tissue-paper and other personal-care items.

Analyst’s take on the multi-billion dollar deal

The deal is expected to transform International Paper Co. to become the global market leader for fluff-pulp, surpassing competitors including Koch Industries, noted analyst at BMO Capital Markets in New York. The anticipated rise in demand for hygiene products presents bright prospects for fluff-pulp manufactured from softwood.

Meantime, Moody's Investor Service has stated that the deal is credit positive for both the companies. The cash proceeds will help Weyerhaeuser to significantly reduce their leverage. For International Paper, the deal is likely to generate cost synergies, albeit marginally increasing its leverage.

Roundup of recent acquisitions by International Paper Co.

International Paper had recently signed an agreement with Swedish Holmen to buy latter’s newsprint mill in Madrid, Spain. It was decided to continue production of newsprint paper until the second half of 2017. Towards the end of 2017, the mill would be converted into containerboard. The agreement also covers Holmen’s energy and recycled paper operations at the facility.

About International Paper Co.

International Paper is a global leader in the paper and packaging industry with manufacturing operations in North America, Europe, Latin America, Asia and North Africa. Headquartered in Memphis, Tenn., the company employs approximately 65,000 people and is strategically located in more than 24 countries serving customers worldwide.

About Weyerhaeuser Co.

Weyerhaeuser is one of the world's largest private owners of timberlands. It owns or controls more than 6 million acres of timberlands, primarily in the U.S., and manages another 14 million acres under long-term licenses in Canada.