International Paper Company (IP), a global paper and packaging firm, has recently acquired the majority stake in Olmuksa, a Turkish corrugated packaging company, for approximately $56 million. The company purchased all the shares of its joint venture partner Sabanci Holding in Olmuksa to own 87.5% of its total outstanding shares.
Going forward, the company is likely to float a mandatory tender offer for the remainder of shares (approximately 12.5%) in accordance to the rules and regulations of the Turkish Capital Markets Board.
With the acquisition, International Paper has strengthened its presence in Turkey to leverage its strategic positioning to drive future growth in the Middle East region. In addition, the Turkish corrugated market in itself is quite attractive – currently being the 7th largest in Europe with an expected annual growth rate of over 5%. Consequently, the deal is anticipated to fuel its growth engine across geographical borders.
International Paper has historically followed an inorganic growth strategy to extend its operations. The company acquired Temple-Inland Inc. in February 2012 and the corrugated packaging business of Weyerhaeuser Co. (WY) in August 2008.
International Paper expects the acquisition of Temple-Inland to yield synergies of $400 million by the end of 2013, derived largely from operations, freight, logistics, selling expense and overheads. Moreover, the combination is likely to fortify the packaging business of North America by increasing its share in the corrugated packaging market to 34% from the existing level of 27%.
Headquartered in Memphis, Tennessee, International Paper has manufacturing operations in North America, Europe, Latin America, Russia, Asia and North Africa. The company’s businesses include uncoated papers and industrial and consumer packaging. Employing approximately 70,000 people, International Paper has a strategic presence in more than 24 countries serving customers worldwide.
We have a Neutral recommendation on International Paper, which currently has a Zacks #2 Rank (Buy). We also have a Neutral recommendation and a Zacks #3 Rank (Hold) for Domtar Corporation (CCO), one of the competitors of International Paper.
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