Weyerhaeuser facilities in Yakima. Moses Lake sold - NBC Right Now/KNDO/KNDU Tri-Cities, Yakima, WA |

Weyerhaeuser facilities in Yakima. Moses Lake sold

Associated Press - March 17, 2008 2:15 PM ET

FEDERAL WAY, Wash. (AP) - Weyerhaeuser has sold its containerboard packaging and recycling unit to International Paper for $6 billion.  The sale includes nine mills, 72 packaging locations, 10 specialty-packaging plants, four kraft bag locations and 19 recycling plants.

About 14,300 employees work at the containerboard packaging and recycling business.

Weyerhaeuser said it plans to use a good part of the sale's proceeds to pay down debt as it focuses on its timber, wood products and real estate operations.  Memphis-based International Paper 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," John Faraci, International Paper's chairman and chief executive officer.

The increased debt led Moody's Investors Service to revise its outlook on International Paper to "negative" from "stable."

Once the sale is complete, International Paper will be the largest containerboard producer in North America, JPMorgan analyst Claudia Shank Hueston said in a research note Monday.

Because of the worsening credit crunch and a limited number of viable suitors, Hueston said the deal is "about as good as (Weyerhaeuser) could've gotten at this stage."

The two companies have largely become mirror images of each other in recent years, with Weyerhaeuser shedding most of its paper production and International Paper selling off the vast majority of its timberlands, Paul Latta, an analyst with McAdams Wright Ragen, told The Associated Press.

"Strategically it seems to make sense for both companies," Latta said.

The sale includes nine container board mills; 72 packaging locations, including sites at Bellevue, Moses Lake, Olympia and Yakima; 10 specialty-packaging plants; four kraft bag and sack locations; and 19 recycling plants, including one in Kent, Wash.

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

"And then we've got a bridge that goes out to 18 months to put in permanent financing. ... The costs, without going into numbers, is roughly equivalent of the debt that we retired through the buyback as we went through the transformation program," Nicholls said.

With an expected tax benefit of $1.4 billion from the purchase of Weyerhaeuser assets, International Paper put the net cost of the deal at about $4.6 billion.

The sale is expected to close in the third quarter of 2008, subject to regulatory reviews and completion of financing, International Paper said.

Weyerhaeuser shares rose $1.09, or 1.8 percent, to close at $63.06 Monday, while International Paper shares fell $2.79, or 8.6 percent, to $29.47.

Weyerhaeuser Co. plants, mills and locations affected by the $6 billion sale:

Nine containerboard mills:

Alabama: Pine Hill

California: Oxnard

Iowa: Cedar Rapids

Kentucky: Henderson

Louisiana: Campti

Oklahoma: Valliant

Oregon: Albany, Springfield

Mexico: Xalapa

72 packaging locations:

Alabama: Huntsville

Arizona: Phoenix, Yuma

Arkansas: Fort Smith, Russellville

California: Anaheim, Camarillo, Compton, Elk Grove, Exeter, Modesto, Salinas, Sanger, Santa Paula

Colorado: Golden

Florida: Plant City, Tampa

Georgia: Columbus, Griffin, Lithonia

Illinois: Aurora, Bedford Park, Belleville, Lincoln, Montgomery, Rockford

Indiana: Butler, Indianapolis

Iowa: Cedar Rapids, Waterloo

Kansas: Kansas City

Kentucky: Bowling Green, Louisville

Michigan: Three Rivers, Warren

Minnesota: Austin, Fridley, St. Paul, White Bear Lake

Mississippi: Jackson, Magnolia, Olive Branch

Missouri: Maryland Heights, St. Joseph

Nebraska: Omaha

New Jersey: Barrington, Bellmawr

New York: Rochester

North Carolina: Charlotte, Lumberton, Newton

Ohio: Delaware, Eaton, Mount Vernon

Oklahoma: Oklahoma City

Oregon: Beaverton, Portland

Tennessee: Cleveland

Texas: Amarillo, Dallas, McAllen, Sealy

Virginia: Lynchburg

Washington: Bellevue, Moses Lake, Olympia, Yakima

Wisconsin: Manitowoc

Mexico: Ixtac, Mexico City, Monterrey, Silao

10 specialty packaging plants:

California: Cypress

Georgia: Tucker

Illinois: Aurora

Indiana: Indianapolis

Kentucky: Richwood

North Carolina: Charlotte

Ohio: Delaware

Oregon: Beaverton, Hillsboro, Salem

Four kraft bag and sack locations:

California: Buena Park

North Carolina: Charlotte

Oregon: Beaverton

Texas: Dallas

19 recycling facilities:

Arizona: Phoenix

California: Fremont, Los Angeles/Norwalk, West Sacramento

Colorado: Denver

Illinois: Chicago/Itasca

Iowa: Des Moines

Kansas: Wichita

Maryland: Baltimore

Minnesota: New Brighton

Nebraska: Omaha

North Carolina: Charlotte

Oregon: Beaverton, Eugene

Tennessee: Memphis

Texas: Carrollton

Utah: Salt Lake City

Virginia: Richmond

Washington: Kent

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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