Weyerhaeuser Co. announced Monday it’s selling seven of its pulp mills to International Paper Co. for $2.2 billion as part of broader move to steer away from the pulp industry. The company’s Longview liquid packaging plant and NORPAC were not included in the transaction, but they’re still up for sale.
Union officials representing Weyerhaeuser pulp mill workers in Longview weren’t surprised by Monday’s announcement.
“We were expecting it and have been preparing for Longview to sell. All indications are that it will happen and an announcement may even come in the next week or month,” said Greg Pallesen, vice president of the Association of Western Pulp and Paper Workers.
AWPPW represents about 450 of Weyerhaeuser’s 950 pulp mill workers in Longview.
Weyerhaeuser remained guarded about whether there are any potential buyers lined up for Longview.
“The strategic review is still ongoing for the Liquid Packaging Board and NORPAC businesses ... These are great businesses, a fact validated throughout the review process. We do not know the timing for decisions, but we will provide additional details when we conclude the strategic review,” Anthony Chavez, a Weyerhaeuser spokesperson, said by email.
The forestry company announced in November its plan to potentially shed its cellulose fiber business, including its Longview mills. In February, Weyerhaeuser nearly doubled its U.S. timber acreage when it finalized a $8.8 billion merger with Plum Creek, creating the world’s biggest timberland and forest products company. The Federal Way-based company will use most of the proceeds from Monday’s sale to pay off debt from the merger.
Paul Latta, industry analyst with Glacier Peak Capital, said the pulp mill sales makes sense as Weyerhaeuser sharpens its focus on timber.
“Their hands are fairly full already (with the merger) and so their emphasis is on just trying to make the timber side of the business work. If they can simplify their portfolio (by selling off pulp making assets), I think there’s merit to that.”
Before Monday’s sale, Weyerhaeuser had 24 percent share of the fluff pulp market, second to Georgia-Pacific LLC’s 28 percent share, according to industry analyst RISI.
International Paper’s purchase includes five fluff pulp mills in Mississippi, Georgia, North Carolina and Alberta, with a combined total capacity of nearly 1.9 million metric tons. Two modified fiber mills in Mississippi and Poland also were included.
Unlike newsprint and book industry, the fluff market is growing at about 3 to 4 percent a year globally. Fluff pulp is a soft, white material used in diapers, feminine products and some bandages.
“The fluff pulp assets were sought-after assets. I would guess the newsprint business is a bit of tougher sell,” Latta said. Newsprint has steadily declined for more than a decades as more newspapers close and consolidate.
Anti-trust laws may require International Paper to sell off two mills, bringing down the purchase price by about $50 million, according to a filing with the U.S. Securities and Exchange Commission.
Based in Memphis, Tennessee, International Paper makes paper and packaging and said the deal will expand its product offering to businesses.
The company will get a $300 million tax benefit for the deal, bringing its total cost for the mills down to $1.9 billion.
International Paper’s stock rose 19 cents to $43.46 a share Monday, and Weyerhaeuser nudged up by 16 cents to $32.28 per a share.