International Paper to Exit Chinese Coated Board JV in China
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International Paper, Memphis, Tenn., USA, this week announced that it has entered into a definitive agreement with its Chinese coated board joint venture partner, Shandong Sun Holding Group Co., to sell its 55% equity interest in the joint venture (IP-Sun JV). As consideration for the sale, IP will receive RMB 149 million (approximately $23 million) in cash. Additionally, the company will remove approximately $400 million of currently outstanding debt from its balance sheet, along with the other assets and liabilities of the IP-Sun JV, following completion of the transaction.
IP also announced this week that it is pursuing strategic options for its corrugated box business in China and South East Asia and has signed a non-binding letter of intent with a prospective buyer based in China.
"International Paper undertook a thorough review of its position in serving the Chinese and Asian markets," said Mark Sutton, IP chairman and CEO. "The company remains committed to serving these very important markets, but concluded we could be more effective supplying this region with globally competitive products primarily through our Ilim joint venture in Russia and from the U.S."
The IP-Sun JV transaction is expected to be completed within the next six months, subject to satisfaction of closing conditions, including obtaining required Chinese governmental approvals. IP estimates the agreement to sell the Chinese coated board joint venture, which started in 2006, will result in net pre-tax noncash asset write-offs of approximately $200 million to be recorded in the third quarter of 2015.
The table below reflects the IP-Sun JV balance sheet as consolidated in IP's balance sheet as of Sept. 30, 2015. The total asset and liability amounts below will be classified as assets and liabilities held for sale in IP's consolidated balance sheet as of September 30. The IP-Sun JV will be deconsolidated from IP's consolidated balance sheet following the completion of the sale.
The IP-Sun JV has one manufacturing location in Shandong Province in China, which includes four paper machines and approximately 1.4 million annual metric tons of coated board capacity. IP's Industrial Packaging Asia business has 18 corrugated box plants in China and South East Asia and a workforce of approximately 3,000 employees.
