IP to buy Weyerhaeuser’s pulp business for $2.2 billion

International Paper entered into a definitive agreement to purchase rival Weyerhaeuser’s Cellulose Fiber pulp business that it first put up for sale following the acquisition of Plum Creek Timber Co. for $23 billion, the two timberland and paper products giants announced Monday (May 2) in separate news releases.

Under terms of the $2.2 billion sale, Memphis-based IP will acquire five pulp mills and two converting facilities that produce fluff pulp, softwood pulp and specialty pulp for a number of consumer applications including diapers, hygiene products, tissue and textiles.

Because the transaction is a purchase of assets, IP said it expects to realize a tax benefit with an estimated net present value of approximately $300 million. Including this benefit, the net price is approximately $1.9 billion. International Paper forecasts annual synergies nearly $175 million by the end of 2018, which will require the need for one-time costs of approximately $85 million.

“Weyerhaeuser’s pulp business has an outstanding customer base served from low-cost, well-run assets that complement our existing system and offers significant synergy opportunities,” said IP Chairman and CEO Mark Sutton. “This transaction will position us as the premier global supplier of fluff pulp and will enhance our ability to generate additional free cash flow. We look forward to working with the talented employees of Weyerhaeuser as we integrate our businesses and create an even stronger company.”

Weyerhaeuser’s pulp business has some 1900 employees working at five pulp mills located in Columbus, Miss.; Flint River, Ga.; New Bern, N.C., Port Wentworth, Ga. and Grande Prairie, Alberta (Canada), with a combined total capacity of nearly 1.9 million metric tons. The deal does not include any of Weyerhaeuser’s operations in Arkansas.

The sale also includes two modified fiber mills in Columbus, Miss. and Gdansk, Poland. The combined business will provide the company flexibility to manage a wide portfolio of products to meet customer needs, IP officials said.

WEYERHAEUSER CONTINUES STRATEGIC REVIEW OF NEWSPRINT, PAPER PUBLISHING BUSINESS
For its part in the deal, Weyerhaeuser said the agreement completes the first phase of the company’s strategic review of the Cellulose Fibers business after announcing in November that it planned to acquire crosstown rival Plum Creek. That deal was completed on February 19.

“This transaction delivers compelling value for Weyerhaeuser shareholders and further focuses our portfolio as we work to be the world’s premier timber, land, and forest products company,” said Weyerhaeuser President and CEO Doyle Simons.

Simons added: “I want to thank the employees of the Cellulose Fibers pulp mills for continuing to operate safely, and for delivering an exceptional customer experience throughout the strategic review process. Our mills are world class producers of pulp, and the assets and people are among the finest in the industry. This transaction will position the mills to achieve their full potential as part of an industry-leading pulp and paper manufacturer.”

Both companies expect the deal to close in the 4th quarter of 2016, subject to certain closing conditions – primarily the approval of regulator officials.

The Federal Way, Wash.-based timberland giant said the transaction with IP does not include Weyerhaeuser’s liquid packaging board facility or newsprint and publishing papers joint-venture. Weyerhaeuser is still reviewing the sale or spin-off of those businesses, company officials said.

In early trading, IP’s shares were up 12 cents at $43.39 on the New York Stock Exchange. Weyerhaeuser’s stock was also trending upward at $32.42, up 30 cents in the morning session.