Merger of xpedx, Unisource Would Create Mega-Merchant

MEMPHIS, TN—International Paper is in talks with Norcross, GA-based Unisource regarding a proposed business combination of xpedx, International Paper's distribution business, and Unisource. Both xpedx and Unisource are business-to-business distributors of printing, packaging and facility supplies. The discussions were initiated when Unisource approached International Paper about a possible merger and, on April 19, the parties entered into a non-binding letter of intent to explore a possible transaction.

The letter of intent outlines a "Reverse Morris Trust" transaction in which International Paper would contribute the assets of xpedx to a newly-formed corporation, and receive a cash dividend financed with debt in the new corporation's capital structure. This new corporation would be spun off to International Paper shareholders and immediately thereafter merged with Unisource in a transaction intended to be tax-free to International Paper and its shareholders.

The amounts of the relative ownership in the merged company by International Paper and Unisource shareholders, and the amount of the dividend payment to International Paper, are the subject of further negotiations between the parties. Following the spin-off and merger, the new company would be an independent, publicly traded corporation with a majority of independent directors.