Int'l Paper in Bidding War for Champion

PURCHASE, NY—International Paper (IP), based here, has made an unsolicited $6.2 billion cash and stock counter-offer to acquire Stamford, CT-based Champion International, which had already planned a friendly merger with Finland's UPM-Kymmene Corp. As part of the deal, IP would also assume about $2.3 billion in debt from Champion.

Sparking the move is a recent 20 percent slide in UPM's share price, which has caused the value of the UPM's all-stock offer to slip from $6.6 billion at the time it was announced to about $5 billion.

The possible bidding war is only the latest turmoil to hit the paper industry after a wave of consolidation deals swept over the industry a few weeks ago.

IP is offering $43 in cash plus $21 in its own stock for each share of Champion, or $64 a share—well above Champion's current stock price and also above the value of UPM's offer, now valued at about $52 per share.

The proposed union would create a powerhouse paper and forest products company, with annual earnings of more than $30 billion.

"Our cash and stock offer is far more attractive to Champion shareholders," International Paper chief executive John Dillon contends. "It not only represents a significant premium over the UPM-Kymmene offer, but also provides Champion shareholders certainty of value and much more liquidity. A merger with Champion affords us the opportunity to significantly improve profitability by strengthening our core businesses.

"Champion will be an important addition to our Printing and Communications Papers business, particularly in the coated papers and uncoated freesheet segments, and will enhance our timber and building materials businesses. There is no question in my mind that we will be a stronger company. We have long said that our strategy is to serve the global marketplace from platforms around the world . . . Champion also fits well with this strategy, since it will greatly expand our Latin American base, and make us a party to distribution agreements with Asian and European producers."

Champion released a statement saying its board of directors would "consider the proposal and respond as appropriate."

In Helsinki, UPM also responded, saying only that it would "consider the situation."

Dillon said he believed the two companies already had similar cultures and could be integrated easily.

IP said it expected that a merger with Champion would result in annual cost savings of $425 million as manufacturing operations are consolidated and overhead costs are cut, mainly in North America.

IP also announced plans to sell more than $3 billion in assets by the end of 2001 as part of its plan to increase focus on its core businesses.

"The assets that will be sold are not strategic to International Paper's core businesses. The acquisition of Champion and the divestiture program that we are announcing will significantly increase the focus of IP by redeploying capital into our core businesses," Dillon adds.