Int'l Paper Acquires Temple Inland - Analyst Blog

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After an eight month chase, International Paper Co. ( IP ) has completed the acquisition of Temple Inland (TIN) for nearly $4.5 million. International Paper has purchased the shares of Temple-Inland at $32.00 per share. The deal included an assumption of $700 million in Temple-Inland's debt.                 

The transaction was completed through Metal Acquisition Inc., a subsidiary of Temple Inland.  With the recent approval of the US Department of Justice (DOJ) both the companies overcame the final hurdle for their proposed merger.

As per the agreement, International Paper will divest 970,000 tons of containerboard mill capacity and its facility in Hueneme, California. Further, it will also sell Temple-Inland's facilities in Ontario, California and New Johnsonville, Tennessee.


It is expected that this acquisition will augment the bottom line in the very first year and yield synergies of $300 million annually within two years of closing. Moreover, the combination will fortify the packaging business of North America by increasing its share in the corrugated packaging market to about 40%.

The pursuit for Temple-Inland began in June last year. However, it was in September that International Paper was able to ink the deal to acquire Temple-Inland. The transaction is the International Paper's largest since August 2008 when it acquired Weyerhaeuser Co.'s corrugated-packaging business for $6 billion. Temple-Inland's shares ceased trading in the New York Stock Exchange.

In November, 2011, in order to fund the transaction, International Paper, priced a sale of $1.5 million in debt. The proceeds along with other debt financing and cash were to be used to finance the purchase. In the fourth quarter of 2011, International Paper had cash and cash equivalents of $3.994 billion with debt-to-capitalization ratio at 59.9% as of December 31, 2011.

Even though International Paper is making efforts to repay its debts, its debt levels still remain high. The debt-to-capitalization ratio increased to 59.9% as of December 31, 2011 from 53.3% as of September 30, 2011.

Moreover, the company depends heavily on raw materials such as wood fiber, purchased in the form of pulpwood, wood chips and old corrugated containers ( OCC ), and certain chemicals, including caustic soda and starch, and energy sources, principally natural gas, coal and fuel oil. Though OCC costs have moderated lately, rising chemical and energy costs still remain risks.    

Based in Memphis, Tennessee, International Paper Company is a global paper and packaging company with operations in North America, Europe, Latin America, Russia, Asia, and North Africa. International Paper conducts its businesses through five segments.

Currently, the shares of International Paper retain Zacks #3 Rank (short-term "Hold" recommendation). It competes with the companies like MeadWestvaco Corporation ( MWV ) and Weyerhaeuser Co. ( WY ).


 
INTL PAPER ( IP ): Free Stock Analysis Report
 
MEADWESTVACO CP ( MWV ): Free Stock Analysis Report
 
WEYERHAEUSER CO ( WY ): Free Stock Analysis Report
 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: IP , MWV , OCC , WY

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