IP Not Fretting About Antitrust Review of Weyerhaeuser Deal

 

According to a report this past week by The Wall Street Journal, New York , N.Y., USA, aggressive antitrust enforcement isn’t worrying International Paper (IP), Memphis, Tenn., as it awaits regulatory approval of its $2.2 billion acquisition of assets from Weyerhaeuser.

"It’s certainly a deal that can get done," said Carol Roberts, IP’s CFO, in an interview.

The transaction, announced this past Monday, needs approval from antitrust regulators. IP is buying five pulp mills and two facilities that produce pulp used to make items such as diapers, tissues, and textiles.

Yet regulators have struck down several large deals in recent months. On Sunday, oil-services company Baker Hughes canceled its pending $35 billion merger with Halliburton after the Justice Department sued to block the merger because of concerns about lower competition in the space.

Office supply companies Staples and Office Depot are also struggling with a challenge to their pending deal from the Federal Trade Commission. On Tuesday (May 10), Staples announced it was terminating the deal, with a break-up fee, according to an updated report this week by the Journal.

But Roberts noted that market demand is causing companies to produce more of the kind of pulp used in such items, which could help make the case for the acquisition’s regulatory approval. Supply-chain consulting firm Smithers Pira (U.K.) noted in a report that the market for the pulp is growing, and projected a 20% increase in production of the material between 2015 - 2020.

There’s no breakup fee tied to regulatory approval with this acquisition, an indication that the companies don’t feel there’s much risk regulators will block this deal. Roberts said IP is willing to sell up to two mills to meet any governmental concerns about concentration, but Weyerhaeuser would get $50 million less if a second mill is sold.

In the Baker Hughes transaction, fears about regulatory disapproval caused the company to demand a $3.5 billion breakup fee in case antitrust authorities blocked Halliburton’s bid. Baker Hughes will now get that cash.

 

The Wall Street Journal also published another story this past week detailing how IP's acquisition is related to growing demand for diapers and feminine hygiene products.