The assets to be sold include 16 manufacturing facilities: five solid-wood mills, four particleboard plants, two medium-density fiberboard plants, one fiberboard plant and four gypsum wallboard plants. The facilities are located across eight states, primarily in the southeastern and eastern portions of the U. S., with access to five of the top 12 housing markets, the seller said.
"Building products isn't an area that's core to our business," said International Paper spokesman Thomas Ryan, who explained that these assets were acquired with International Paper's purchase of Temple-Inland Inc. last year. "We've said all along that we going to hold this and then going to sell it. We felt this was a good time to do so."
International Paper said it would use proceeds to pay down debt. The deal should close in the first quarter of 2013, subject to customary closing conditions, including regulatory approval.
Georgia-Pacific makes paper-based consumer and packaging products, as well as building materials. Its own building products brands include wood panel brand Blue Ribbon; ToughRock, a drywall product; and DensGlass, a brand of fiberglass mat gypsum panels. "We're looking at this as a long-term investment. It's obviously a good fit for our building products division," said Georgia-Pacific spokesperson Karen Cole.
"They got a good price," said D.A. Davidson & Co. analyst Steven Chercover. "Most people thought [International Paper] would get $400 million, $500 million. [I thought the assets] would be worth north of $500 million."
International Paper in September 2011 struck a deal to acquire Austin, Texas, rival Temple-Inland for $4.3 billion in cash, or $32 per share, and assumption of $600 million in debt. The deal faced a lengthy review by the Department of Justice because of antitrust concerns. The DOJ in Feb. 2012 approved the deal on the condition that International Paper sell three containerboard mills.
On June 1 International Paper said it had deals in place to sell two California containerboard mills to a joint venture of Kraft Group LLC and Schwarz Partners LP, and a New Johnsonville, Tenn.-based facility to Hood Cos. International Paper did not reveal terms of each individual sale.
International Paper on Oct. 24 said it would invest 952 million reais ($470 million) into a new joint venture with Brazilian corrugated packaging producer Jari Celulose, Embalagens e Papel S/A. Jari is part of Barueri, Brazil-based forestry products conglomerate Grupo Orsa.
Georgia-Pacific employs nearly 35,000 people worldwide. Witchita, Kan.-based Koch Industries Inc. finalized the $21 billion acquisition of Georgia-Pacific in December 2005.
Joseph P. Messina at Bank of America Merrill Lynch advised International Paper on the deal. James S. Bruce at K&L Gates LLP was counsel to International Paper.
International Paper shares traded up 0.72%, to $37.65, on Thursday afternoon.
-- Lou Whiteman contributed to this report
French mergers and acquisitions lawyer Laurent Faugerolas joined Dechert LLP. For other updates launch today's Movers & shakers slideshow.
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