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International Paper to Buy Temple-Inland

International Paper Co. (IP), the largest pulp and paper maker, agreed to acquire Temple-Inland Inc. (TIN) after raising its offer to $3.7 billion, ending a three-month battle for control of the shipping-box manufacturer.

International Paper increased the all-cash bid to $32 a share, the Memphis, Tennessee-based company said today in a statement. Temple-Inland, which is based Austin, Texas, had previously rejected a June 6 offer of $30.60 a share as too low. Temple Inland rose as much as 26 percent in New York.

To fend off the original bid, Temple-Inland had adopted a so-called poison pill takeover defense that limited any person or group from acquiring more than 10 percent of its stock. The company also has a staggered board, meaning it could have taken more than a year for International Paper to gain control through proxy fights.

“The choice we had to make was do we sit and wait for a long time and take the hard road or take the easy road,” International Paper Chief Executive Officer John Faraci said today in a telephone interview. “We’ve said from the outset that a friendly, negotiated transaction was our objective and that’s what we accomplished.”

Faraci said in June the deal would raise International Paper’s share of the North American corrugated-packaging market to about 37 percent from 27 percent. Regulatory approval for the deal is expected by the year-end, he said today on a conference call.

Markets Drop

Temple-Inland rose $6.25, or 25 percent, to $30.88 as of 10:34 a.m. in New York Stock Exchange composite trading. The shares traded as low as $19.03 on Aug. 23 amid tumbling stock markets and on speculation the takeover wouldn’t proceed. International Paper climbed 55 cents, or 2.2 percent, to $26.04.

Temple-Inland’s “growing awareness” of weakness in U.S. stock markets and the country’s economy probably compelled it to come to the negotiating table sooner than expected, Faraci said in the interview.

“When we got into due diligence we saw some plusses and some minuses that affirmed our value,” he said.

Evercore Partners Inc., UBS AG and law firm Debevoise & Plimpton LLP are advising International Paper. Goldman Sachs Group Inc. and Wachtell, Lipton, Rosen & Katz are advising Temple-Inland.

In January, Norcross, Georgia-based Rock-Tenn Co. agreed to buy Chicago-based Smurfit-Stone Container Corp. for $4.5 billion to become North America’s second-biggest containerboard producer, after International Paper.

To contact the reporters on this story: Christopher Donville in Vancouver at cjdonville@bloomberg.net.

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net.

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