International Paper Co., Memphis, Tenn., USA, this week entered into a definitive agreement to purchase Weyerhaeuser's (Federal Way, Wash.) pulp business. Under terms of the agreement, 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, other hygiene products, tissue, and textiles.

The five pulp mills are located in Columbus, Miss.; Flint River, Ga.; New Bern, N.C., Port Wentworth, Ga. and Grande Prairie, Alberta, with a combined total capacity of nearly 1.9 million metric tons. The sale also includes two modified fiber mills in Columbus, Miss. and Gdansk, Poland. The transaction does not include Weyerhaeuser's liquid packaging board facility or newsprint and publishing papers joint-venture. Weyerhaeuser's review of those assets is ongoing.

Because the transaction is a purchase of assets, IP 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. IP forecasts annual synergies of approximately $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 approximately 1,900 employees throughout the U.S. (Mississippi, Georgia, North Carolina), Canada, and Poland. The combined business will provide the company flexibility to manage a wide portfolio of products to meet customer needs.

The acquisition is expected to close in the fourth quarter of 2016, subject to certain closing conditions, primarily the receipt of regulatory approval.

International Paper is a global leader in packaging and paper with manufacturing operations in North America, Europe, Latin America, Russia, Asia and North Africa. Its businesses include industrial and consumer packaging along with uncoated papers and pulp. The company employs approximately 55,000 people and is strategically located in more than 24 countries serving customers worldwide. IP net sales for 2015 were $22 billion. 

 

In February 2016, Weyerhaeuser merged with Plum Creek Timber Co., and today the group owns or controls more than 13 million acres of timberlands, primarily in the U.S., and manages additional timberlands under long-term licenses in Canada. The company operates as a real estate investment trust.