IP to spin off non-North American operations

Memphis, Tennessee-based International Paper (IP) has announced a plan to create two publicly traded companies: International Paper will be comprised of its current business in North America while the EMEA (Europe-Middle East-Africa) Packaging business will consist of facilities and offices in that part of the world.

IP says operations at both new entities will include a combination of longtime IP mills and facilities and those acquired when IP merged DS Smith into its company early last year.

“The separation will create two leading sustainable packaging solutions companies, each with focused management teams and business models, tailored investment and capital allocation strategies and compelling financial profiles,” states IP.

Combining IP and DS Smith enabled the company to “significantly strengthen the businesses in both North America and EMEA,” states the producer of packaging board (much of it recycled-content board) and downstream packaging products.

“During the past year, we have created two regional powerhouses with scale, strong customer relationships, leading brands and talented teams,” says IP board chair and CEO Andy Silvernail.

Continues the CEO, “The two businesses operate in distinct market environments and are at different stages of their transformation. We have learned a lot about how to create value in each region. The next right step in our transformation journey to achieve full value creation potential is to create two independent, regionally focused companies. Taking this swift, decisive action now will enable both businesses to reach best-in-class performance and maximize long-term value creation through enhanced focus on their unique opportunities and targeted investment approaches.”

According to IP, the spinoff maneuver will provide it “with the focus and targeted capital allocation strategy to strengthen its position as a leading sustainable packaging company in North America, focused on customers and leading on innovation, with an advantaged cost position.”

In North America, IP says it will continue to serve a wide range of industries with sustainable packaging solutions, designed to protect products, enhance supply chains and support customer sustainability goals.

“Continued progress in North America will enable the company to compound earnings, grow cash flows and deliver superior shareholder returns,” states IP, adding that following the separation, IP “intends to accelerate investment toward organic growth, productivity and disciplined strategic acquisitions, while maintaining a strong, investment-grade balance sheet.”

Andy Silvernail will continue to serve as board chair and CEO of International Paper, Lance Loeffler will remain chief financial officer and Tom Hamic will remain president of IP’s Packaging Solutions North America business unit.

IP describes the newly created EMEA Packaging as operating in 30 countries in that region, saying the company will consist of IP’s current Packaging Solutions EMEA business, operating as DS Smith, which “includes the combination of legacy DS Smith and IP assets.”

Continues IP, “Built specifically for EMEA, the standalone business will be a leading provider of innovative, sustainable packaging solutions focused on meeting evolving market demands, helping customers achieve their sustainability goals and reallocating resources to drive innovation and enhanced service.”

Following the split, Tim Nicholls, current president of DS Smith, will serve as CEO of the new publicly traded company. David Robbie, who formerly served on the DS Smith board as a senior independent director, is expected to serve as board chair with the newly established EMEA Packaging, says IP.

The separation is expected to be structured as a spin-off of the combined EMEA Packaging business to shareholders, says IP, which says it “intends to retain a meaningful ownership stake in the new company.”

The new company is expected to be listed on both the London Stock Exchange and the New York Stock Exchange in a separation process that may take from 12 to 15 months, according to IP.

New York-based Jefferies served as lead financial advisor to IP while New York-based Evercore also served as a financial advisor. New York-based Wachtell, Lipton, Rosen & Katz served as legal counsel to International Paper.