International Paper plans spin-off of printing papers business

03 Dec 2020 − 

Printing papers are one of International Paper's three main divisions. Now the group wants to spin off the segment and focus on its pulp and industrial packaging businesses.

International Paper (IP) is planning to spin off its printing papers segment to make it a standalone, publicly traded company. The group explains it wants to sharpen its focus on the industrial packaging and cellulose fibres segments in the future. The transaction will result in two streamlined companies.

The proposed spin-off is still subject to closing conditions such as the final approval by the Board of Directors and is expected to be completed late in the third quarter of 2021. The new company will be referred to as SpinCo until it establishes its own corporate identity.

According to IP, the transaction will be implemented through the distribution of SpinCo shares to the group's shareholders. International Paper, for its part, will retain up to 19.99 per cent of the shares in the new company at the time of the separation, with the intent to monetise and provide additional proceeds to the group.

In fact, International cites its intention to reduce costs as one of the reasons for this move. The company expects to reduce its cost structure by $300m by 2023 thanks to the spin-off. Overall, it hopes to generate an additional $350-400m of annual earnings by then.

But the group also makes it clear that it is changing its future focus. International Paper wants to accelerate profitability growth in its Industrial Packaging business in North America and Europe, the Middle East and Africa and also improve the returns of its Celllulose Fibres business. The printing business is currently hard hit by the structural decline and the coronavirus crisis, with demand constantly falling. IP will retain its stake in joint venture company Ilim Group, which is a producer of pulp, corrugated packaging and office papers.

Once the spin-off is concluded, International Paper will operate 20 containerboard mills with 14.5 million tpy of capacity, 8 pulp mills with a capacity of 3.2 million tpy as well as 220 converting facilities. The operations are expected to generate annual sales of $17bn, of which 85 per cent will account for Industrial Packaging and 15 per cent for Cellulose Fibres.

According ot IP, the newly founded company will comprise eight mills making up to 2.9 million t of printing papers as well as 400,000 tpy of coated paperboard. These activities together generate around $4bn in sales. SpinCo will be led by Jean-Michel Ribiéras who is currently senior vice presidet of IP's Industrial Packaging division and will become the CEO of the company. John V. Sims, currently senior vice president of Corporate Development, will serve as SpinCo's CFO.

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