International Paper, the giant pulp-and-paper company, has announced its plans to acquire the pulp business of Weyerhaeuser, a real estate investment trust, for $2.2 billion in cash.
The deal requires Weyerhaeuser to turn over the controls of its five paper mills and two converting facilities to International, according to the company.
International Paper, a Tennessee-based paper-and-packaging giant, said the deal is broken down to a value of $1.9 billion, with an additional $300 million in the form of tax benefit. The two firms hope to close their deal in the fourth quarter.
The Washington-based Weyerhaeuser operates a pulp business, aside from its real estate investment firm. Its paper-related business currently employs around 1,900 workers in six separate facilities located in North Carolina, Georgia, Mississippi, Canada and Poland.
The Tennessee-based company said it is looking to save around $175 million every year in "synergies" - a business term that usually refers to cost cuts, savings from combined purchasing power and revenue improvements - by the close of 2018.
International Paper has a bigger operation, having a total of approximately 55,000 employees in over 24 countries, and overall revenues in 2015 that reached around $22 billion.
This company is the largest producer of corrugated cardboard packaging. It is now investing heavily on diapers.
The deal has a potential of making International the leader in the global fluff-pulp market, placing it effectively ahead of Georgia-Pacific of Koch Industries, according to Mark Wilde, an analyst with the BMO Capital Markets Corp.
"Weyerhaeuser's pulp business has an outstanding customer base served from low-cost, well-run assets that complement our existing system and offers significant synergy opportunities," said Mark Sutton, CEO of International Paper in a statement.
"This transaction will position us as the premier global supplier of fluff pulp and will enhance our ability to generate additional free cash flow," he added.
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