Comment

27 July 2005

International Paper looks to jettison assets

Moving to end a prolonged slump it blames on lower paper and packaging volumes and higher energy and raw-material costs, International Paper is launching a restructuring plan that may include selling or spinning off chunks of the company that account for nearly one-third of its sales.

The Wall Street Journal reported the paper maker said this week that after-tax proceeds from the sales and spinoffs could range from $8 billion to $10 billion. It is unclear who might be interested in the assets.

The company said its "three-part transformation plan" would include mill closures and narrowing its focus to two major businesses: uncoated papers, such as those used for office printers and for printing books, and industrial and consumer packaging.

The plan accelerates moves International Paper began in recent months to divest itself of underperforming or cyclical businesses. Deals include the sales of its Weldwood of Canada Ltd. unit to West Fraser Timber Co. for about $960 million, the fine-paper business to Mohawk Paper Mills for about $65 million, and its industrial-paper operations to a private-equity group for $180 million.

The company's shareholders have owned a stagnant stock in recent years; a $10,000 investment in International Paper stock five years ago was valued at $9,305 following this week's announcement.

As part of the restructuring, International Paper said it would decide in the next 30 days whether to move its headquarters to Memphis, Tenn., from Stamford, Conn.

Seven businesses may be on the auction block, including coated-papers units in Parana, Brazil; a beverage-packaging mill in Pine Bluff, Ark.; the Kraft Papers business in Roanoke Rapids, N.C.; Arizona Chemical; and potentially all of its 6.8 million acres of U.S. forestland with related wood-product plants. The company previously said it was evaluating the sale of its 50.5% stake in New Zealand-based Carter Holt Harvey Ltd. The plan also includes potential conversions or shutdowns of mills in Florida, Louisiana, Iowa, and Indiana. The company said the restructuring might affect about 15,000 employees out of a total global work force of 80,000, though it wasn't clear how many layoffs might result.

John Faraci said the company needed “a new direction in order to effectively compete. We're not waiting for the market to improve.”