March 18, 2008 in Business

Paper company expands footprint

Woody Baird Associated Press
 

MEMPHIS, Tenn. – International Paper, a global supplier of packaging materials and uncoated paper, announced Monday it is buying the containerboard unit of Weyerhaeuser Co. for $6 billion in cash.

Memphis-based International Paper said it will pay for the purchase through increased debt.

The company has greatly cut its debt and improved cash flow since launching a major reorganization in 2005 to move away from forest products and focus on producing uncoated paper and containerboard.

The planned purchase, which would make International Paper the largest containerboard producer in North America with a 29 percent market share, drew cautious reactions from market analysts.

The increased debt led Moody’s Investors Service to revise its outlook on International Paper to “negative” from “stable.”

Goldman Sachs downgraded International Paper to “neutral” from “buy,” saying its analysts “view the transaction as relatively expensive and a strategic negative for IP” though they remain positive on the longer-term prospects for the company.

The sale includes nine container board mills; 72 packaging locations; 10 specialty-packaging plants; four kraft bag and sack locations; and 19 recycling plants.

About 14,300 employees work at the containerboard packaging and recycling business.

Weyerhaeuser shares rose $1.07, or 1.6 percent, to $62.96 in afternoon trading Monday.

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