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International Paper Ceo John Faraci Tells Fox Business the Company’s Purchase of Temple Inland Is Not “A Bullish Bet on the Economy But a Realistic Investment in Business”

September 06, 2011 | About:

International Paper (NYSE:IP) CEO John Faraci spoke with FOX Business Network’s (FBN) Ashley Webster about the company’s $3.7 billion purchase of Temple Inland Inc. Faraci said the purchase isn’t “a bullish bet on the economy but a realistic investment in business.” Faraci went on to say that International Paper has “a debt repayment program that is going to enable us to rapidly pay down” the 600 million dollar debt the company is assuming from Temple Inland and he assures shareholders that the deal is “not a levering up transaction.” Excerpts from the interview are below.

On the International Paper’s purchase of Temple Inland:

“We thought this was a good value at 32 dollars a share. This is a very compelling acquisition for International Paper. It will generate a lot of cash. The logic has always been there. This had to be a transaction that made sense for Temple share owners and International Paper shareowners and at the end of the day, the boards of both companies concluded that it did. This is an investment in a business we are already in, and in a cost reduction opportunity to improve the efficiency of both businesses. I wouldn’t say it is a bullish bet on the economy but a realistic investment in a business that will enable us to be more successful going forward and withstand some of the competitive pressures that are there in a tough economic environment.”

On assuming Temple Inland’s 600 million dollars in debt:

“We have a debt repayment program that is going to enable us to rapidly pay down the debt. We are going to bring a billion and a half dollars in cash to the closing. This is not a levering up transaction.”

On the pending lawsuit claiming Temple helped fuel the collapse of Guaranty Bank in 2009:

“That’s something we took very seriously. We put subject matter experts in there to study it because we are not in the banking business. Temple had disclosed the possibility of a lawsuit around the bank. They had also expressed what they thought the ultimate economic impact was; we formed our own view and factored that into our evaluation, and felt that 32 dollars was a very appropriate, conservative bid that enabled us to earn a good return for our shareholders.”

On clean technology:

“We are one of the greenest industries out there. The Forrest Products industry us really the poster industry for green jobs, and recycling, renewability, and sustainability.

On whether there will be jobs lost:

“There will be some but by far the biggest levers we will be working on to take costs out of the combine companies are in areas like logistics, purchasing, scheduling. There are big economic improvements there.”


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