IP to sell its stake in Ilim to JV partners

International Paper Company (IP) has entered into an agreement to sell its 50 per cent interest in Ilim SA to its joint venture (JV) partners for an equity value of $484m. The sale was subject to regulatory approvals in Russia, the company announced.

Ilim SA is the holding company for the Ilim joint venture in which International Paper Company and a group of Russian shareholders each hold a 50 per cent stake. According to EUWID information, the JV partners are the co-founders of the company, the chairman of the board of the Ilim Group Zakhar Smushkin and the brothers Boris and Mikhail Zingarevich.

The transaction indicated “$3.5bn in total enterprise value based on a 3.1X EBITDA multiple on 2022 full-year results,” including $2.45bn in net debt as of 31 December 2022, IP explained.

IP said it also received an indication of interest from its JV partners to purchase the company’s 2.39 per cent stake in JSC Ilim Group, the pulp and paper manufacturing branch, for $24m on terms and conditions to be agreed. IP intends “to pursue an agreement to sell the JSC Ilim Group shares, and to divest other non-material residual interests associated with Ilim, to its JV partners”, the company announced in a press release.

JSC Ilim Group runs pulp and paper operations at three sites in Russia, producing graphic paper, packaging paper, and pulp for integrated paper production as well market pulp. Output in 2021 stood above 3.5 million t, of which approximately 2.2 million t of pulp, 815.000 t of corrugated case material and 530,000 t of woodfree coated and uncoated paper. Recently Ilim started trial runs on the new 600,000 tpy kraftliner machine at the company’s Ust-Ilimsk pulp and paper mill.

The Ilim holding also controls company’s active in the segments of corrugated products, timber and trading. Ilim’s packaging branch runs two sites in Russia producing 130,000 tpy of corrugated products.

Shortly after Russia’s invasion on Ukraine, International Paper had announced its intention to explore strategic options for the Ilim Group, including the possible sale of its 50 per cent stake. At that time, IP had explained that it had “no intention to seek suspension of operations or initiate any liquidation or bankruptcy proceedings with respect to Ilim Group.”

In October last year, International Paper’s graphic paper spin-off Sylvamo also divested its assets in Russia. The company sold its activities, including the Svetogorsk pulp and paper mill and long-term harvesting rights on 3,480 km² of government owned forest land, to Pulp Invest Limited Liability Company, a management buyout vehicle, for a total consideration of $420m.

The Svetogorsk mill employs 1,700 people and is geared for annual production capacity of approximately 650,000 tpy of market pulp, paper, and board.

The mill produces 380,000 t of woodfree uncoated paper, 120,000 t of liquid packaging board and 155,000 t of BCTMP market pulp.

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