IP+IP: Move will unite US, Russian
a joint press release from Moscow, Russia, October 25, International Paper
and Ilim Pulp, Russia’s largest forest products enterprise, announced they
had signed a letter of intent to establish a 50:50 joint venture. It would
be the largest foreign/domestic alliance in the Russian forest sector.
International Paper will buy a 50% equity interest in Ilim Holding. The
total valuation of Ilim Holding in the joint venture is about $1.3 billion.
The board of directors would include equal representation from both
companies and the HQ would be in St. Petersburg.
Ilim Pulp operates four pulp and paper mills situated in the European and
Siberian regions of Russia, and produces about 2.5 million tons per year of
market pulp, uncoated papers and packaging. Ilim Holding is consolidating
ownership of the individual mills into a single Russian open joint-stock
company, Ilim Group, a subsidiary of Ilim Holding.
A long-term investment program will see some $1.2 billion invested in the
four mills over about five years. Described as an “unprecedented investment
in the Russian pulp and paper industry,” it would be used to upgrade
equipment, increase capacity by about 1 million tons (40%) and develop
International Paper chairman and CEO John Faraci said the joint venture
should benefit Russia “by significantly propelling the development of a
globally competitive sustainable forest products industry in Russia.”
International Paper already owns the Svetogorsk mill in the Leningrad
The Svetogorsk mill would remain separate as would Ilim Pulp’s wood-products
enterprises, themselves to be com-bined to create Russia’s largest
timberprocessing holding company.
Ilim Pulp chairman Zakhar Smushkin said the alliance “would align strategies
that create unprecedented opportunities for both parties and for the entire
Russian forest-products industry.” It would provide Russia “a competitive
edge over other emerging markets in attracting needed capital to the
Frank Graves, a former pulp salesman for Tembec Inc., is Ilim Pulp’s
executive vice-president. He joined in 2002 as COO.
The agreement should be finalized in 1Q07 pending due diligence, and
regulatory and board approvals.
International Paper is 100 years old. It is transforming its operations to
focus on its global uncoated papers and packaging businesses, which operate
and serve customers in the U.S., Europe, South America, Asia, Russia and
Ilim Pulp, Saint Petersburg, Russia, incorporated in 1992, claims to be
among the world’s top 10 companies in output of market pulp. It ranks sixth
internationally in timber reserves and logging volumes. Ilim’s core
activities are solid wood products, pulp and containerboard, and packaging.
Ilim Pulp employs a total of 42,000 people and produces 60% of market pulp
and 50% of boxboard manufactured in Russia.
Ilim Pulp was the target of a take-over attempt in 2002.
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