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Paper makers to merge
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November 24, 1998: 11:09 a.m. ET
International Paper to buy Union Camp in $6.6 billion stock swap
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NEW YORK (CNNfn) - International Paper, a leading producer of forest products, agreed Tuesday to purchase its smaller rival, Union Camp Corp., in a $6.6 billion stock swap.
The news of the merger sent Union Camp's (UCC) shares soaring early Tuesday 18-5/16 to 67-1/4, a 37 percent leap. International Paper (IP) stock eased 7/8 to 44-15/16.
The companies said the deal, which includes the assumption of an unspecified amount of debt by IP, will result in $300 million in cost savings through a combination of reduced overhead costs, process improvements and other savings.
The merged entity will employ roughly 98,000 workers and generate annual revenue of $28 billion. The United States accounts for about two-thirds of IP's nearly $21 billion in annual sales, though the company maintains production facilities in 31 countries and has customers in 130 countries.
The merger comes at an inauspicious moment for the forest-products industry.
Dozens of pulp and paper mills in the Northwest, including some belonging to International Paper, have suffered the ill effects of the economic turmoil in Asia. Wood-product companies in Thailand, Singapore and Malaysia have dealt with a capacity glut by selling paper at reduced prices.
U.S. imports of Asian paper products are up nearly 1,000 percent from the summer of 1997, a reality that has eroded the U.S. producers' market strength.
For International Paper, the most blatant sign of distress came in October, when the Purchase, NY-based company announced plans to eliminate 1,500 jobs, or about 2 percent of its 80,000-strong workforce. The company has already trimmed 800 jobs at paper mills in Mobile, Ala.; Ticonderoga, N.Y.; Lock Haven, Pa.; Bastrop, La. and Selma, Ala.
The company is yet to specify where the additional 700 cuts will come.
Under Tuesday's deal, each outstanding share of Union Camp will be exchanged for IP shares valued at $71 each, subject to certain conditions.
The transaction is expected to close at the end of the first quarter of 1999. The deal, accounted for as a pooling of interests, is anticipated to be accretive to IP's earnings in the first full year of operations.
John Dillon, IP's chairman and chief executive officer, will remain in those posts.
Upon completion of the merger, Union camp shareholders will own about 25 percent of the combined company, while International Paper shareholders will own 75 percent.
Union Camp, based in Wayne, N.J., is a leading manufacturer of paper, packaging, chemical and wood products with $4.4 billion in net sales in 1997.
IP reported revenue of $20.1 billion in 1997. The company controls about 6.3 million acres of forestland in the U.S. Through its subsidiaries, it also holds interests in a million additional acres in Chile and 800,000 acres in new Zealand.
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International Paper
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