MEMPHIS, Tenn. – International Paper Co. won U.S. antitrust approval to acquire rival Temple-Inland Inc on the condition that they divest three mills that make paper for corrugated boxes, the U.S. Justice Department said on Friday.
Without the divestitures, the combined company would have had control of 37 percent of the North American capacity for containerboard, which is used to make corrugated boxes, the department said.
Under a consent decree, Temple-Inland will sell its mills in Waverly, Tenn., and Ontario, Calif., and International Paper will divest either its mill in Oxnard, Calif., or one in Henderson, Ky.
“With the mill divestitures, the transaction can proceed and American consumers and businesses across the country can be assured that competition is preserved in this important industry that is vital to the U.S. economy,” said Sharis Pozen, the acting head of the Justice Department’s antitrust division.
Temple-Inland agreed to be acquired in September after International Paper sweetened its offer to $3.7 billion.
NEW YORK ― Corrugated packaging producer Temple-Inland Inc. advised its shareholders on Monday to reject a $3.3 billion hostile takeover offer from International Paper Co., saying the bid undervalues its assets.
IP took its $30.60-per-share offer directly to Temple’s shareholders last week after the company rebuffed its friendly, unsolicited offer last month.
Monday’s widely expected move by Temple-Inland’s board is just advisory.
Shareholders of Temple-Inland are free to do as they wish, but its board can use a “poison pill,” which lets a company increase its total share count at a discount to ward off a potential takeover.
Corrugated packaging, which is used to make shipping boxes, sells for razor-thin profits. If ultimately successful in the buyout, International Paper will be able to consolidate pricing power and extract higher profits for its own shareholders.
“The Temple-Inland board is unanimous in its belief that the offer grossly undervalues Temple-Inland and its prospects, including its position as the return-on-asset leader in the corrugated packaging industry,” Temple-Inland CEO Doyle Simons said in a statement.
IP responded by saying its offer is fair and well above where Temple’s shares sat before the bid was publicly announced.
“We believe Temple’s Board has unrealistic price expectations, and they continue to be unwilling to engage in meaningful negotiations or discussions,” IP spokesman Tom Ryan said.
In morning New York Stock Exchange trading, shares of IP were down 2 percent at $29.26, while Temple-Inland fell 0.9 percent to $31.16.