La. packaging mill part of Weyerhaeuser sale

• By WOODY BAIRD
• Associated Press writer
• Published: Mar 18, 2008 - Page: 1D - UPDATED: 2:20 a.m.

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MEMPHIS, Tenn. — A packaging mill in Campti is part of a $6 billion sale of Weyerhaeuser Co’s Containerboard Packaging and Recycling business to International Paper.

Weyerhaeuser plans to use a large part of the money to pay down debt.

The transaction includes nine containerboard mills; 72 packaging locations, including Campti, north of Natchitoches; 10 specialty-packaging plants; four Kraft bag and sack locations; and 19 recycling facilities. The transaction affects approximately 14,300 employees

International Paper, of Memphis, said it will pay for the purchase through increased debt. The company has greatly cut its debt and improved cash flow since launching a major reorganization in 2005 to move away from forest products and focus on producing uncoated paper and containerboard.

“This is just the exact reason we paid down $7 billion of debt a couple of years ago … to keep the financial flexibility so if something came along that was an opportunity for International Paper we could take advantage of it,” said John Faraci, International Paper’s chairman and chief executive officer.

The planned purchase, which would make International Paper the largest containerboard producer in North America with a 29 percent market share, drew cautious reactions from market analysts.

The increased debt led Moody’s Investors Service to revise its outlook on International Paper to “negative” from “stable.”

Goldman Sachs downgraded International Paper to “neutral” from “buy,” saying its analysts “view the transaction as relatively expensive and a strategic negative for IP” though they remain positive on the longer-term prospects for the company.

Credit Suisse considered the agreement “good for both in the short run,” while noting that International Paper is the only containerboard producer “with the balance sheet to take on $6 billion in debt.”

Weyerhaeuser, meanwhile, will use “substantially all” of the money from the sale to pay down its “lofty debt load,” Credit Suisse said.

International Paper said the purchase will increase its market presence in the United States and Mexico for the company’s core products and boost profits over the long haul.

Weyerhaeuser, one of the world’s largest lumber and packing producers, had been considering a sale of the division as it looked to become more of a pure timber, wood products and real estate company.

Tim Nicholls, International Paper’s chief financial officer, said financing includes a term loan for about $2 billion to be repaid in five years.