International Paper Company IP has entered into an agreement to sell its controlling interest in its India-based paper business, International Paper APPM Limited (APPM), to West Coast Paper Mills Limited (WCPM). Currently, International Paper owns 75% stake in APPM.
The transaction is anticipated to be completed by the end of the current year, subject to customary closing conditions, which include obtaining approvals from government and West Coast Paper Mills Limited's tender offer.
Notably, pursuant to Indian securities’ law requirements, WCPM will launch a tender offer to acquire 25% of APPM's outstanding shares, owned by public shareholders. Following the receipt of antitrust clearance and completion of the tender offer, International Paper will close the deal with WCPM. Based on the results of that tender offer, WCPM will acquire between 51% and 60% of the APPM’s outstanding shares from International Paper at a price per share of INR 275. Once the transaction closes, WCPM will be responsible for the APPM operations and International Paper will be a passive investor until it has sold its remaining shares in APPM.
International Paper’s strategic move to exit from APPM, reflects its focus on expanding its global packaging and cellulose fibers businesses. Moreover, the company’s paper business in India continues to flourish well.
Coming to its share price performance, the stock has lost around 16.6% over the past year, outperforming the industry’s 38.4% decline.
Recently, the company reported first-quarter 2019 results. Adjusted earnings in the quarter were $1.11 per share, improving 18% from the prior year. The bottom-line figure also outpaced the Zacks Consensus Estimate. Net sales rose to $5,643 million in the quarter from $5,621 million, recorded in the year-ago quarter.
In the Global Cellulose Fibers business, global pulp demand has been steadily strong and demand in the fluff segment consistently perked up. Product introductions in the fluff pulp segment and its optimization initiatives are likely to drive the company’s performance in 2019. In the Printing Papers segment, higher global demand will bolster the segmental revenues.
In the North American Industrial Packaging business, box demand remains solid, aided by e-commerce and produce. The momentum will continue in 2019 as well. Further, the company’s focus to serve the rapidly-growing segments will be an important catalyst for its strong uptick. Its concerted efforts to align with customers will also drive its performance.
International Paper Company Price and Consensus
International Paper Company price-consensus-chart | International Paper Company Quote
Zacks Rank & Stocks to Consider
International Paper currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the Basic Materials space are Materion Corporation MTRN, Fortescue Metals Group Ltd. FSUGY and AngloGold Ashanti Limited AU, each currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Materion has an expected earnings growth rate of 27.1% for 2019. The company’s shares have ascended 17.9% in the past year.
Fortescue Metals has an estimated earnings growth rate of 99.3% for the current year. The stock has appreciated 88.7% in a year’s time.
AngloGold has a projected earnings growth rate of 85.9% for 2019. Its shares have rallied 35.4% over the past year.
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