Weyerhaeuser sells containerboard biz to International Paper

Deal worth $6 billion will create new conainerboard leader

By Dave Hannon -- Purchasing, 3/17/2008 8:34:00 AM

Paper products giant Weyerhaeuser today said it would sell its containerboard packaging business to International Paper for $6 billion.

In a company statement, Carol Roberts, senior vice president of International Paper's packaging business, said Weyerhaeuser “has low-cost, well-run assets that complement our existing mill and converting system and offer significant synergies," she said. "The acquisition expands our geographic presence in the U.S. and Mexico and diversifies our customer base in key product line.”

Company officials said Weyerhaeuser’s packaging business includes 6.3 million ton of annual capacity from nine containerboard mills and 72 box plants. A presentation on the International Paper web site puts International Paper's 2007 North American containerboard market share at 13% while Weyerhaeuser's was 16%. Combined they will have a 29% market share, far surpassing the 19% held by market leader Smurfit-Stone Container Corp.

Claudia Shank Hueston, a New York-based analyst at JPMorgan Chase & Co. said in a report that the Weyerhaeuser business will increase International Paper's exposure to more volatile recycled fiber and raise its debt. Hueston also says in a Bloomberg report, the deal “shifts International Paper's earnings profile back toward North America.''

Economic ratings firm Moody’s didn’t like the deal, saying it expects “the acquisition to increase International Paper's already strong aggregate scale and boost its margin stability. But the immediate increase in debt load will be the biggest factor affecting the company's ratings in the short term.”

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