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LONDON, UK / ACCESSWIRE / October 26, 2017 / Pro-Trader Daily takes a look at the latest corporate events and news making the headlines for International Paper Co. (NYSE: IP), following which we have published a free report that can be viewed by signing up at http://protraderdaily.com/optin/?symbol=IP. The Company announced on October 24, 2017, that it has signed an agreement to divest its North America Consumer Packaging business to Graphic Packaging Holding Co. (NYSE: GPK). The Boards of Directors of both companies have approved the deal which is valued approximately $1.8 billion. For immediate access to our complimentary reports, including today's coverage, register for free now at:
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Discover more of our free reports coverage from other companies within the Packaging & Containers industry. Pro-TD has currently selected Owens-Illinois, Inc. (NYSE: OI) for due-diligence and potential coverage as the Company reported on October 23, 2017, its financial results for Q3 2017 which ended on September 30, 2017. Tune in to our site to register for a free membership, and be among the early birds that get our report on Owens-Illinois when we publish it.
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Commenting on the divestment Mark Sutton, Chairman and CEO of International Paper, said:
"After evaluating a range of strategic options, we believe this transaction represents excellent value for IP's shareholders. Investing in Graphic Packaging gives IP the opportunity to benefit from a much stronger value-creation consumer packaging platform, while allowing us to remain focused on growing value in our core businesses."
Michael Doss, President and CEO of Graphic Packaging, added:
"We expect the transaction will significantly increase our mill production and converting scale, meaningfully increase our exposure to the growing foodservice market, provide significant runway to realize synergies, and drive strong financial results."
Transaction details
Graphic Packaging plans to form a new partnership by combining its existing business with North America Consumer Packaging's business. Graphic Packaging will own the majority controlling stake with 79.5% in this partnership and will be the sole operator of the business. IP will own the remaining 20.5% in the partnership as a part of the divestment agreement. The partnership will create a leading integrated paper-based packaging company with approximately $6 billion of revenue and $1 billion of earnings before interest, tax, depreciation, and amortization (EBITDA) post-synergies.
As per the terms of agreement, IP will receive a total of $1.8 billion from this divestment. Out of the total $1.14 billion will be in the form of 20.5% stake in the partnership company with Graphic Packaging and the remaining $660 million will be in cash. The partnership company will assume IP's existing debt of $660 million thereby adjusting the cash component of the deal.
The deal also stipulates that IP's stake in the partnership will have a lock-in period of two years and that it cannot buy Graphic Packaging's shares for a period of 5 years.
The transaction is expected to close in early 2018 and is subject to regulatory approvals and other closing conditions.
Graphic Packaging does not expect to make any changes in its Board or top management team because of this transaction.
Benefits for Graphic Packaging
IP's North America Consumer Packaging business is a leading producer of solid bleached sulfate (SBS) paperboard and paper-based foodservice products globally with $1.6 billion revenue. Through the acquisition of North America Consumer Packaging business, Graphic Packaging gains two SBS mills located in Augusta, Georgia and Texarkana, Texas with annual production capacity of 1.2 million tons of SBS; and three converting facilities in the US and one in UK with the capacity to convert 250,000 tons of SBS paperboard into over 24 billion units of paper-based cups and cylindrical containers. These facilities are expected to expand Graphic Packaging's existing business and diversify into the SBS foodservice markets and folding carton converting. The North America Consumer Packaging business is projected to generate adjusted EBITDA of $210 million in 2017.
The transaction is expected to result in synergies of $75 million mainly from reduction in costs, increased paperboard integration, and efficiencies from procurement and mill operations from the third year of closing the transaction. Graphic Packaging expects the transaction to accretive within a year of closing the transaction.
About International Paper Company
Memphis, Tennessee based International Paper is one of the world's leading producers of renewable fiber-based packaging, pulp and paper products. The Company has manufacturing operations in North America, Latin America, Europe, North Africa, and Russia. The Company manufactures packaging products, pulp for diapers, tissue and other personal hygiene products, papers for stationery and paper bags, cups and food containers.
The Company has presence in over 24 countries and is supported by a global team of 55,000 employees. For FY16, the Company reported net sales of $21 billion.
About Graphic Packaging Holding Company
Atlanta, Georgia based Graphic Packaging is a leading provider of packaging solutions for a wide variety of products to food, beverage, and other consumer products Companies. It is one of the world's largest manufacturers of folding cartons, unbleached paperboard, coated recycled board, microwave packaging, and machinery. In US it is one of the largest producers of folding cartons and holds leading market positions in coated unbleached kraft paperboard and coated-recycled paperboard. Some of the world's most widely recognized companies and brands are current customers of the Company.
Last Close Stock Review
International Paper's share price finished yesterday's trading session at $57.99, falling 1.16%. A total volume of 2.45 million shares have exchanged hands, which was higher than the 3-month average volume of 1.87 million shares. The Company's stock price surged 0.87% in the last three months, 5.59% in the past six months, and 24.44% in the previous twelve months. Additionally, the stock rallied 9.29% since the start of the year. Shares of the Company have a PE ratio of 29.44 and have a dividend yield of 3.28%. The stock currently has a market cap of $23.94 billion.
At the closing bell, on Wednesday, October 25, 2017, Graphic Packaging's stock rose slightly by 0.72%, ending the trading session at $15.31. A total volume of 6.91 million shares have exchanged hands, which was higher than the 3-month average volume of 3.29 million shares. The Company's stock price rallied 15.55% in the last three months, 12.08% in the past six months, and 22.58% in the previous twelve months. Moreover, the stock surged 22.68% since the start of the year. The stock is trading at a PE ratio of 28.20 and has a dividend yield of 1.96%. The stock currently has a market cap of $4.73 billion.
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