Paper profits
Over the past few years, rival US paper and wood products companies Boise Cascade, Weyerhauser, MeadWestvaco and Georgia Pacific have sold off much of their forest holdings to concentrate on the manufacturing and retailing. Now International Paper is following suit.
The company announced it had sold 5.4 million of its 6.8 million acres of US forests. The series of deals brought in around $6.5 billion, and involves the largest sale of private forest land ever. The land was sold to several investors, a timber investment firm called Resource Management Service.
This is all part of an attempt to focus on paper and packaging. International paper has being buying up paper firms over the last decade, including its 2004 purchase of Box USA.
In addition, it has made major investments in manufacturing. The company is also heavily involves in international expansion.
The plan is to invest more in those higher margin industries and to buy back stock. These lands have been a major long term investment for the company, which has held most of them for more than 100 years.
With this move, International Paper is removing itself from the risks of sitting on resources that require patience. In return, it is getting instant cash and the ability to act short-term. As with other successful companies, International Paper is happy to shift risk to smaller companies.
