International Paper Co. announced to buy Weyerhaeuser’s pulp business for $2.2 billion in order to expand global position and complement its paper-and packaging business.
Memphis, Tennessee-based International Paper said that the company will realize a $300 million tax benefit from the transaction, which will lower the purchase price to $1.9 billion. The company also expects annual cost savings of $175 in synergies by the end of 2018.
International Paper is the world’s largest paper company with about 55,000 employees in more than 24 countries. The company reported revenue of $22 billion in 2015.
The Weyerhaeuser’s pulp assets have a total annual production capacity of almost 1.9 million metric tons and have about 1,900 employees in the U.S., Canada and Poland. Under the deal, International Paper will receive five mills and two converting operations that produce fluff pulp, softwood pulp and specialty pulp.
IP Chairman and Chief Executive Mark Sutton expects that transaction will make the company the “premier global supplier” of fluff pulp, which include consumer goods such as diapers, other hygiene products, tissue and textiles.
“The market is a good market,” Sutton said on the conference call. “It’s growing globally. It’s all about consumer products that make people’s lives better. The capacity that’s being added is targeted at different levels of products, and I think we’ll be able to operate very, very well within that environment.”
Federal Way, Washington-based Weyerhaeuser said that it will use a portion of the estimated $1.6 billion of after-tax proceeds to repay term loans related to the company’s $2.5 billion share-buyback program.
IP shares rose 0.4 percent to $43.45 at 2:56 p.m. in New York.