What had been rumored for several months—the sale of Stamford, CT-based International Paper’s coated paper and supercalendered paper divisions—finally occurred on June 5. IP signed an agreement to sell the divisions to CMP Holdings, an affiliate of Purchase, NY-based private investment firm Apollo Management, for $1.4 billion. The deal is expected to close in mid-summer.
Both based in Memphis, TN, International Paper’s coated and SC papers divisions include four paper mills, located in Jay, ME; Bucksport, ME; Quinnesec, MI; and Sartell, MN. Last year the business generated $1.6 billion in sales and produced about 2 million tons of coated freesheet and coated groundwood papers for the magazine, catalog, and retail insert markets.
Before the impending deal was announced, several industry watchers speculated that a sale at IP could lead to more paper mill closures. But since an investment firm bought the two divisions, catalogers should breathe a sigh of relief, says Michael Wade, director of sales and marketing at Deerfield, IL-based distributor Wade Paper Corp.
“IP has been very clear in their intentions to sell the coated division, so this should not be a surprise to anyone,” Wade says. “I believe that most customers are happy that the sale is to an investment company, instead of another mill. They will most likely close this deal in August and until then they will operate as status quo. Eventually, there will be a new company name and identity, but I don’t think anyone would expect any major product changes anytime soon.”
Similarly, Chris Bradley, president of Portland, ME-based bedding merchant Cuddledown, says catalogers shouldn’t worry about the sale of IP’s coated and SC paper divisions. “My opinion is that when someone pays more than $1 billion for a business, they will probably work hard to keep the existing customers happy, so I would expect it to be business as usual,” he says.
And David Goldschmidt, vice president of marketing, catalog division for Newport, CA-based Strategic Paper Group, says he doesn’t expect to see much change for the end user. “I also believe this is a good thing for the catalogers, as opposed to having a merger or consolidation with another paper manufacturer, because from a competitive pricing standpoint it did not eliminate one of the choices or options in the marketplace,” he says.
That’s not to say the outlook is rosy for paper prices, however. International Paper and Fraser Papers both announced a $2.50 per hundredweight (cwt) price increase, or $50 per ton, on coated groundwood #5 products for the third quarter beginning July 1. In addition to the third-quarter price hike announced by International Paper, IP general manager Michael A. Weinhold said in a letter to customers that the second-quarter 5% increase on coated groundwood #4 would continue.