International Paper Co. avoided being pushed out of the coated paper market when it recently purchased Champion International Paper Corp., according to the company and paper industry analysts.
Jack Cox, spokesman for International, said the buyout enhanced the mid-size company's ability to compete against its biggest peers and put it among the leading vendors that sell paper to printers and direct marketers.
Cox said his firm, which does business in several other pulp-based industries, eventually would have bailed out of the coated paper market had it not purchased Champion.
“One of the primary reasons we went through with the [deal] was because International was posed with the dilemma of being in or out of the coated paper business,” he said. “We want to be in, not out.”
International Paper, Purchase, NY, made the acquisition for an estimated $7.3 billion, gaining ownership of all Champion common stock at $75 per share — an effort that squelched Finnish paper giant UPM-Kymmene's intentions of making a major American purchase in the industry.
Market pundits said the deal saved International's future in coated paper. Mark Wilde, an analyst at consulting and financial firm Deutsche Bank, said this market segment will see fewer mid-size paper manufacturers like International survive competition from larger players.
“For IP and a lot of middle-tier-type paper companies, it's either time to get bigger or get the heck out,” he said.
The capital and name recognition gained in the buyout “will certainly help International Paper compete with the bigger firms.”
Cox said the deal could improve the efficiency of his company's paper production, lowering prices for its print customers and subsequently making the paper firm more attractive to prospective clients.
“Our company's main objective is to increase profitability,” he said. “There are definitely reports or schools of thought that predict improved efficiency and lower prices in the aftermath of a major acquisition like this one. Although, we are not prepared to make that kind of prediction.”
Cox said his firm had not decided under which company name Champion's paper products would be branded.
