International Paper announces spinoff business

International Paper (IP), Memphis, Tennessee, has announced a plan to pursue a spinoff of the company’s Printing Papers segment into a stand-alone, publicly traded company it’s referring to as “SpinCo.” According to a news release from IP, this transaction will result in two streamlined companies. IP reports that it expects the separation to be tax-free for the company’s shareowners for U.S. federal income tax purposes. The company expects to complete the spinoff by the third quarter of 2021.

“We remain committed to producing sustainable products that people depend on every day and accelerating value creation for International Paper and our shareowners. This transaction represents a logical next step as we continue to build a better IP,” says Mark Sutton, chairman and chief executive officer at International Paper. “International Paper will be a more focused corrugated packaging and absorbent cellulose fibers company serving attractive segments, well-positioned to increase earnings and cash generation. I am confident that our plans will create value for our shareowners, employees, customers and other stakeholders.”

Upon completion of the spinoff, Jean-Michel Ribiéras, currently senior vice president, Industrial Packaging, at International Paper, will become the chief executive officer of the new company, which IP will refer to as “SpinCo” until the company establishes its own corporate identity. IP reports that the remainder of the SpinCo leadership team and board of directors will be announced over the next several months.

According to IP, SpinCo will offer its services to customers in North America, Brazil and Europe. The company says SpinCo’s anticipated capital structure is intended to allow strategic and operating flexibility and the potential to optimize the business. As a stand-alone entity, SpinCo will have approximately $4 billion in sales and eight mills with 2.9 million metric tons of annual capacity and 0.4 million metric tons of coated paperboard capacity.

IP reports that the transaction will be implemented through the distribution of SpinCo shares to IP shareowners. IP will retain up to 19.99 percent of the shares of SpinCo at the time of the separation, with the intent to monetize and provide additional proceeds to IP.

As a result of the spinoff, IP says it plans “to accelerate profitable growth in Industrial Packaging in North America and Europe, the Middle East and Africa and improve the returns of its Global Cellulose Fibers business.” The company says it also will continue its joint venture with Ilim Holdings in Russia.

IP also plans to reduce its cost structure and accelerate earnings. The company says it expects to generate an additional $350 to $400 million of annual earnings by the end of 2023, including $50 to $100 million in annual incremental earnings growth and $300 million in structural cost reductions.

Following the completion of the transaction, IP reports that it expects to have about $17 billion in sales, 85 percent in its Industrial Packaging business segment and 15 percent in its Global Cellulose Fibers segment. It will operate 20 containerboard mills with about 14.5 million tons of annual capacity as well as eight pulp mills with about 3.2 million metric tons of annual capacity. It will also have 220 converting facilities, 350 packaging facilities and 3,500 packaging formers at customer locations.