International Paper Company announced this week that it has completed its acquisition of corrugated packaging manufacturer Temple-Inland Inc., which is now a wholly owned subsidiary of International Paper (IP). The deal pays Temple-Inland common stockholders $32 in cash per share. With the assumption of $700 million in Temple-Inland net debt, the total transaction value is about $4.5 billion.
More important for the more than 350 Orange Linerboard Plant employees at the facility north of Little Cypress in Orange County, there are no plans to close or sell the plant as a result of the acquisition.
Tom Ryan, senior public relations manager for IP, said, “In the vast majority of cases the name on the signs at the plant will change, but we will still be doing the same thing we have been doing. That is making quality products to meet our customers’ needs.”
In fact, the signs at the Temple-Inland’s Orange plant were covered with vinyl banners proclaiming International Paper’s newly assumed ownership. Although the consummation of the deal this week might have surprised some, IP first announced its intention to acquire Temple-Inland for $32 a share in September 2011.
The deal had come under scrutiny from the U.S. Department of Justice (DOJ) over possible violations of federal antitrust rules. With $25 billion in annual revenue, International Paper was already the largest producer of containerboard in North America. The combined company would have controlled 37 percent of the North American market, which the Justice Department said could have increased “the volume of containerboard over which International Paper would benefit from a price increase, and likely would have led International Paper to strategically reduce its output of containerboard in order to increase the market price.”
The DOJ approved the deal after IP agreed to sell mills in Ontario, Calif., and Tennessee to remove 970,000 tons of containerboard mill capacity. That does not alter the fact IP was the largest player in the market, and that position is enhanced by the Temple-Inland acquisition.
On a related note, IP declined to offer specifics about the fate of some 430 employees at Temple-Inland’s Austin headquarters, though SEC filings indicate Temple-Inland’s leadership team will not be retained.
But IP went to some lengths to complete this deal. John Faraci, IP chairman and CEO, released a statement that said, “We are very pleased to have completed this compelling transaction. The combination of International Paper and Temple-Inland strengthens our North American packaging business and enhances our ability to generate cash flow while maintaining our strong balance sheet. We look forward to working with the employees of Temple-Inland as we successfully integrate our businesses and create an even stronger company with substantial benefits for our customers, employees and shareholders.”
This high-level corporate drama is a long way from the sawmill Thomas L.L. Temple founded in Diboll, Texas, in 1894 to process timber for his Southern Pine Lumber Company from the 7,000 acres of timberland the company owned. By the time of Temple’s death in 1935, those holdings had grown to 278,000 acres.
In 1973, the magazine giant Time Inc. acquired Temple Industries and merged it with Eastex Pulp and Paper Company to form Temple-Eastex Inc. In 1983, Time joined Temple-Eastex with Inland Container Corporation and spun them off as Temple-Inland.
In 1986, Temple-Inland acquired certain Owens-Illinois properties, including the linerboard mill in Orange. At the time of the sale to IP, the company’s corrugated packaging operation consisted of seven mills and 59 converting facilities.