International Paper (IP), headquartered in Memphis, Tennessee, says it has entered into an agreement to sell its Brazilian corrugated packaging business to Sao Paolo-headquartered Klabin S.A. for 330 million real ($64 million), with 280 million real ($55 million) to be paid at closing and 50 million real ($9.8 million) to be paid one year thereafter, subject to certain adjustments. This business includes three containerboard mills and four box plants.
The agreement follows IP's previously announced strategic review of its Brazilian packaging business in the fourth quarter of 2018.
In IP’s “2018 Annual Performance Summary,” the company notes: “During 2018, a determination was made that the current carrying value of the long-lived assets of the Brazil Packaging business exceeded their estimated fair value due to a change in the outlook for the business. Management engaged a third party to assist with determining the fair value of the business and the fixed assets. The fair value of the business was calculated using a probability-weighted approach based on discounted future cash flows, market multiples and transaction multiples, and the fair value of the fixed assets was determined using a market approach.”
IP says the transaction is expected to close in the second half of 2020, subject to certain closing conditions and regulatory approvals. The company adds that it will continue to run its Papers and Forestry businesses in Brazil.
Klabin is Brazil’s largest paper manufacturer and exporter and the country’s leading producer of papers and paperboard for packaging, industrial bags and corrugated board packaging. The company also supplies hardwood pulp, softwood pulp and fluff pulp to the market.