IP Buys Remaining Orsa Stake - Analyst Blog

International Paper Company IP purchased 25% remaining stake in its Brazilian joint venture, Orsa International Paper Embalagens S.A., from its collaboration partner for $135 million.

With this transaction, International Paper will now be in complete charge of partner Jari Cellulose's former corrugated packaging assets, comprising of three containerboard mills and four box plants. The original transaction, in which International Paper had purchased a 75% stake, was finalized in Nov 2012, for an aggregate purchase price of $470 million. The purchase consideration for the 25% state is in line with the original deal.

The transaction strengthens International Paper's focus on growing its lucrative industrial packaging business into unexplored, profitable markets. The company has been a dominant player in the printing papers business in Brazil for over half a century. The company's Brazilian operations include brands like Chamex, Chamequinho and Chambril.

The company has undergone restructuring over the past eight years to discard its non-core operations and develop its traditional industrial packaging businesses. The process has included offloading of over $11 billion worth of timberland and other non-core businesses. Meanwhile, it has expanded its market share in the industrial packaging segment by way of strategic acquisitions, namely Weyerhaeuser Co.'s WY packaging division in early 2008 and Temple-Inland in 2012.

In January, the company announced the spin-off of its struggling xpedx distribution business in order to further streamline its operations and generate economic profits. The spin-off was a part of its strategy to increase focus on its legacy business of industrial and consumer packaging and printing papers segments.

International Paper currently holds a Zacks Rank #3 (Hold). Other better-ranked stocks in the paper & related products industry that are worth a look include Domtar Corp. UFS and Neenah Paper, Inc. NP, both of which carry a Zacks Rank #1 (Strong Buy).