Weyerhaeuser Company announced an agreement to sell its Cellulose Fibers pulp mills to International Paper for $2.2 billion in cash. Weyerhaeuser expects to use a substantial portion of the estimated $1.6 billion after-tax proceeds for repayment of term loans issued in conjunction with the company's previously announced $2.5 billion share repurchase program.
The transaction includes five pulp mills located in Columbus, Miss.; Flint River, Ga.; New Bern, N.C., Port Wentworth, Ga. and Grande Prairie, Alberta, with a combined total capacity of nearly 1.9 million metric tons. The sale also includes two modified fiber mills in Columbus, Miss. and Gdansk, Poland.
The transaction with International Paper does not include Weyerhaeuser's liquid packaging board facility or newsprint and publishing papers joint-venture. Weyerhaeuser's review of those assets is ongoing.
Weyerhaeuser Chief Executive Doyle R. Simons said the deal furthers the company's efforts to focus its business on timber, land and forest products.
Weyerhaeuser announced in November it would nearly double its U.S. timber acreage by acquiring U.S. rival Plum Creek Timber Co., making its own bet that scaling up can boost profit in the heavily splintered timber industry.
Mark Sutton, International Paper's chief executive, said in an interview the company believes more consumers will be able to afford disposable diapers in the coming years in emerging markets, including in China, which recently ended its one-child policy for couples. At the same time, he added, purchases of diapers to combat adult incontinence should rise as populations grow older in many countries.
The deal will allow International Paper to surpass Georgia-Pacific LLC as the world's largest manufacturer in the roughly $6 billion fluff pulp market. International Paper is acquiring five pulp mills, two converting facilities and roughly $1.5 billion in sales from Weyerhaeuser.
Weyerhaeuser had a 24% share of the fluff pulp market last year, behind Georgia-Pacific's 28% share but ahead of International Paper's 18%, according to industry researcher RISI, which estimates demand will rise 4% annually through 2019.
The transaction is subject to customary closing conditions including regulatory review and is expected to close in the fourth quarter of 2016. The Weyerhaeuser pulp business and International Paper will continue to operate separately until the transaction closes.