International Paper Sets Distribution Ratio for xpedx Spinoff - Analyst Blog

Leading global paper and forest products company International Paper Company IP declared the definitive distribution ratio regarding the spinoff of its distribution solutions business, xpedx. xpedx will merge with UWW Holdings, Inc. to form a new entity, Veritiv Corporation.

Share Distribution
    
Per the board's announcement, on the distribution date of Jul 1, International Paper shareholders will be entitled to receive 0.0188 share of Veritiv for each share of International Paper they own as at 5:00 pm on Jun 20. This would translate into stockholders receiving 8.16 million shares of Veritiv's common stock, under a pro rata distribution system. The distribution is subject to the satisfaction of certain conditions.

Any fractional shares of Veritiv common stock will be aggregated and sold in open market, with the resultant proceeds being distributed in cash to relevant shareholders on a pro rata basis. Veritiv will commence regular trading on the New York Stock Exchange under the ticker 'VRTV' on Jul 2, 2014.

xpedx Spinoff

International Paper had announced the spin-off of its struggling xpedx distribution business in a tax-efficient transaction under a Reverse Morris Trust structure in January. Per the deal, xpedx will merge with UWW Holdings, the parent company of Unisource Worldwide, to form a new entity, Veritiv Corporation. International Paper will receive $400 million in cash and own 51% stake of the new company, with UWW Holdings owning the remaining stake.

Following the expected completion of the merger on Jul 1, Veritiv will own and operate the combined distribution solutions businesses of xpedx and Unisource. It will provide end-to-end print, packaging facility and logistic solutions to customers, by leveraging its extensive geographic reach, rich product portfolio and differentiated service platform.

Going Forward

International Paper, over the past eight years, has undergone restructuring in order to discard its non-core operations and focus on the traditional industrial packaging businesses. The xpedx spin-off was part of its strategy to increase focus on its legacy business, while attempting to create value with an underperforming business by forming a stronger and more competitive company.

North America-based Veritiv's annual revenues are projected in the range of $9 to $10 billion. The merger is expected to generate about $150 million to $225 million in annual net synergies.

International Paper currently holds a Zacks Rank #3 (Hold). Other better-ranked stocks in the basic materials sector include Agnico Eagle Mines Limited AEM, Mercer International Inc. MERC and Compass Minerals International Inc. CMP, all of which sport a Zacks Rank #1 (Strong Buy).