U.S. Department of Justice Friday approved the merger of International Paper Co. (IP) and Temple-Inland Inc. (TIN), on a condition that the companies will divest three containerboard mills.
The approval represents an important regulatory milestone for the $4.3 billion merger of International Paper and Temple-Inland. The companies have agreed to divest Temple-Inland's facilities in Ontario, California and New Johnsonville, Tennessee, and International Paper's facility in Hueneme, California.
According to DOJ, following the merger, the combined company would have had the control of about 37 percent of North American containerboard capacity. The divestitures will help maintain the competition in production and sale of containerboard in the US.
Sharis Pozen, acting assistant attorney general in charge of the DOJ's Antitrust Division, said "With the mill divestitures, the transaction can proceed and American consumers and businesses across the country can be assured that competition is preserved in this important industry that is vital to the U.S. economy."
The consent decree filed in federal court in the District of Columbia requested for the combined company to undertake the post close divestiture of 970 thousand tons of containerboard mill capacity within four months. The department's Antitrust Division must approve the purchaser or purchasers of the divested mills.
International Paper reaffirmed that it expects to achieve at least $300 million of synergies within twenty-four months of closing.
International Paper Chief Executive John Faraci said, "We are pleased to have reached an agreement with the DOJ that addresses their concerns and preserves the value in the combination of these two fine companies."
In September 2011, International Paper agreed to acquire Temple-Inland for $32.00 per share in cash and assume Temple-Inland's $600 million of debt. The $4.3 billion deal was reached after three-month long takeover battle. Earlier at two instances, January 2012 and December 2011, DOJ has extended review of the merger deal to resolve the concerns related to the deal.
IP is currently trading on the NYSE at $31.69, up $0.21 or 0.66%.
TIN is currently trading on the NYSE at $31.99, up $0.12 or 0.38%.
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