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Premdor eyes IP unit
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August 22, 2000: 5:20 p.m. ET
Leading door maker enters formal talks to buy Int'l Paper's Masonite unit
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NEW YORK (CNNfn) - Premdor Inc., one of the world's largest door makers, said Tuesday it has entered exclusive discussions to purchase International Paper Co.'s Masonite Corp., a global manufacturer of high-quality wood products.
Toronto-based Premdor (PI: Research, Estimates) said it hoped to strike a merger agreement by the end of August, although it warned there was no guarantee the two sides could reach an accord.
The discussions are part of International Paper's ongoing effort to eliminate $3 billion in non-core assets from its balance sheet in the wake of its $7.3 billion merger with Champion International. Also on the selling block are the company's Decorative Products division, Flexible Packaging business, Petroleum and Minerals business, Chemical Cellulose business and its interest in Bush Boake Allen.
"By and large, these decisions are being based on our decision to focus on core businesses," said Jack Evans, an International Paper spokesman.
 Premdor and Masonite are hardly strangers. In early 1999, the two companies entered into a strategic alliance designed to reduce costs and increase customer demand for Premdor's products worldwide.
Premdor President and Chief Executive Philip Orsino told CNNfn.com that the alliance has effectively reduced marketing costs and helped grow both businesses, but that an outright merger would take the relationship one step further.
"By merging, we would be able to take more costs out of raw materials, lower joint marketing costs even further and eliminate overhead where it exists," he said. "What's important to us is that we maintain and grow [Masonite's] business."
Through its nine manufacturing facilities around the world, Masonite produces everything from molded door facings to siding to decorative panels.
The group has seen its share of setbacks, most recently last year when International Paper decided to shutter its Pilot Rock, Ore., mill plant and lay off 155 employees due to excess capacity in the Masonite manufacturing system.
International Paper also settled three nationwide lawsuits brought against the company in recent years alleging that various siding and roofing materials produced by Masonite failed prematurely or were defective.
Orsino said those issues were no longer a concern and that Premdor would actually look to raise the company's capacity levels.
Masonite generated sales of $512 million during 1999, a 3 percent increase over the year before, although still down about 10 percent from its 1997 levels.
If the two sides can complete a deal, Premdor said Masonite would remain as a standalone subsidiary under its current management.
Premdor shares closed unchanged Tuesday at 9-9/16 on the New York Stock Exchange while International Paper (IP: Research, Estimates) shed 7/16 to 32-5/16. 
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