International Paper Company (IP) recently announced that its distribution business xpedx will merge with a distribution solution company Unisource Worldwide, Inc. to form a new publicly traded company. The merger is expected to close in the middle of 2014.
The transaction will happen in a Reverse Morris Trust structure, which is used when a parent company has a subsidiary that it wants to sell in a tax-efficient manner. International Paper will receive $400 million in cash and contribute the assets of xpedx to a newly formed wholly-owned subsidiary called xpedx Holding Company. The subsidiary will be spun off into a new company. Following the spin off, UWW Holdings, the parent company of Unisource Worldwide, will merge with xpedx Holding Company. International Paper will own 51% of the new company and UWW Holdings will own the remaining stake.
The newly formed publicly traded company is expected to create an enhanced platform for profitable growth across packaging, print and facility solutions. Post-merger, the new company is expected to have annual revenue in the range of $9 billion to $10 billion and generate approximately $200 million in synergies. The new company is likely to accelerate and enhance top-line growth opportunities and provide customers with innovative solutions in product packaging, paper and print management, supply chain and logistics services and facility solutions
International Paper’s strategic move reflects its intention to create a new company with adequate financial stability while focusing its core businesses and increasing its liquidity. Together, the combined company will be well positioned to provide products and services as well as support its customers' businesses.
Headquartered in Memphis, Tennessee, International Paper is a global paper and packaging company with operations in North America, Europe, Latin America, Russia, Asia, and North Africa.
International Paper currently has a Zacks Rank #4 (Sell). Other stocks that look promising and are worth considering in the industry include Resolute Forest Products Inc. (RFP), carrying a Zacks Rank #1 (Strong Buy), and PH Glatfelter Co. (GLT) and Rexam plc (REXMY), both carrying a Zacks Rank #2 (Buy).