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Strategies & Market Trends : Waiting for the big Kahuna -- Ignore unavailable to you. Want to Upgrade?

To: Vitas who wrote (34381)	11/24/1998 9:55:00 PM
From: Maryann M	Read Replies (1) \| Respond to of 94695

Off Subject --- Interesting! NEW YORK (Reuters) - International Paper Co., the world's largest paper and forest products company, said Tuesday it would buy smaller rival Union Camp Corp. in a stock swap worth $6.6 billion, including assumption of debt. Purchase, N.Y.-based International Paper said it would exchange $71 of its stock for each share of Union Camp, the nation's No. 9 paper company with $4.4 billion in sales in 1997. "This deal is not about size," International Paper Chairman John Dillon said in a conference call. "This was about creating a stronger company with greater value for our shareholders," he said, adding his company approached Union Camp nearly a month ago with the proposal. Wall Street analysts and traders said they expected more consolidation in the paper industry, pushing the sector's shares higher Tuesday. Union Camp jumped $16 to close at $64.94 and was the second-biggest gainer on the New York Stock Exchange. But International Paper slipped $1.69 to $44 on the New York Stock Exchange. "This really begins to put pressure on other paper companies to become serious about deal-making," said Kathy McAuley, analyst at Brown Brothers Harriman. The companies said they expected the merger to boost earnings in the first full year of combined operations and result in $300 million in cost savings. The deal is subject to approval by regulators and shareholders of both companies. International Paper said some of the savings would come from job cuts but declined to be specific. "There will be some consolidation of staff activities associated with the savings," Marianne Parrs, chief financial officer of International Paper, said by telephone. "But we have not put any specific numbers on what they might come to. In the context of the combined company, we're not talking about all that many people," added Parrs, referring to the 80,000 employees of IP and 18,000 Union Camp workers. "It's also quite likely that there will be charges associated with achieving the savings, but its too early for us to have any numbers," she said. The merged company will have 22 percent of the domestic market for paper used for writing, computer printing and photocopying, dwarfing the next largest player, Georgia-Pacific Corp. with a 13 percent share, Brown Brothers' McAuley said. The acquisition comes after International Paper has been divesting some businesses over the past year. It has raised $2 billion from such sales since 1996 and said in August it would sell another $500 million in assets over the next 12 months. The U.S. paper industry, plagued by overcapacity and low returns on capital, has been slow to consolidate. Some deals, did materialize this year, including U.S. newsprint producer Bowater Inc.'s purchase of Canada's Avenor for $2.4 billion. Analysts said lower paper prices, due in part to Asia's economic crisis, will force more paper companies to restructure and consolidate. But they were not holding their breath. "There are certainly indications that we will see more consolidations," BT Alex. Brown analyst Mark Wilde said. "But we've been waiting several years for the dam to break." He said container board and white-paper producers such as Champion and Boise-Cascade were merger candidates. The move also propels International Paper into the top producer ranks of container and linerboard, used for packaging goods ranging from televisions to fruit, with a 14 percent U.S. market share, McAuley said. The biggest producer in that area is Smurfit-Stone Container Corp., which said Tuesday it will cut up to 3,600 jobs, or 10 percent of its work force, and take a $350 million charge in a restructuring. Three members of Union Camp's board of directors, including Chairman W. Craig McClelland, will join IP's board. IP's Dillon will continue as chairman and CEO. IP was advised by CS First Boston in the deal and Goldman Sachs advised Union Camp, Dillon said. Related Stories International Paper To Buy Rival Union Camp (Nov 24 5:26 PM ET) International Paper To Buy Rival Union Camp (Nov 24 4:54 PM ET)