US-based pulp and paper company has entered into an agreement to sell its 50% interest in Ilim SA, the holding company for the Ilim JV, to its joint venture partners for an equity value of $484m. The sale has yet to be approved by Russian regulators
This transaction indicates ~$3.5bn in total enterprise value for Ilim based on a ~3.1X EBITDA multiple on 2022 full-year results ($1.11bn EBITDA), including $2.45bn in net debt.
International Paper said it also received an indication of interest from its JV partners to purchase the company’s 2.39% stake in JSC Ilim Group, the pulp and paper manufacturing branch, for $24m on terms and conditions to be agreed. IP intends to pursue an agreement to sell the JSC Ilim Group shares, and to divest other non-material residual interests associated with Ilim, to its JV partners.
The sale of enterprises in the RF for foreign companies is the more difficult, the larger the assets. And even if a buyer is found, the deal must be approved by the government commission on monitoring foreign investment. In addition, according to the requirement of the Russian Ministry of Finance dated December 22, 2022, the sale must be at a discount of at least 50%.
Shortly after Russia’s invasion on Ukraine, International Paper had announced its intention to explore strategic options for Ilim, including the possible sale of its 50% stake. At that time, IP had explained that it had “no intention to seek suspension of operations or initiate any liquidation or bankruptcy proceedings with respect to Ilim Group.”
International Paper is a leading global supplier of renewable fiber-based products. They produce corrugated packaging products that protect and promote goods, and enable worldwide commerce, and pulp for diapers, tissue and other personal care products that promote health and wellness.
Headquartered in Memphis, Tenn., the company employs approximately 38,000 workers globally, with manufacturing operations in North America, Latin America, North Africa and Europe. Net sales for 2021 were $19.4bn.
International Paper first went into business in Russia in 1995, opening a small office in Moscow to explore opportunities. Three years later, the company bought a 125-year-old paper mill in Svetogorsk (Leningrad region), near the border with Finland. Currently, the plant produces office and offset paper, cardboard and thermomechanical mass, employing 1.5 thousand people.
In 2007, International Paper acquired 50% of the Ilim Group for $650m. Most of the other half of the Ilim Group is owned by businessman Zakhar Smushkin, who is also the chairman of the group’s board of directors.
A key element of the joint venture was a long-term investment program. Over 10 years, International Paper has invested about $3.2bn in the development of the company’s production.
IP announced plans to sell a stake in the Ilim Group in March 2022. In less than a year, foreign timber companies sold 13 plants in Russia.
Ilim is a 50/50 joint venture between International Paper and Ilim Holding. It is one of the largest integrated manufacturers of pulp and paper in Russia. With production facilities in the Leningrad, Arkhangelsk and Irkutsk regions, the company is also the largest foreign-domestic alliance in the country’s forestry products sector.
It has branches in Koryazhma, Bratsk and Ust-Ilimsk, as well as forestry branches that supply raw materials to its production facilities. Ilim also has two corrugated cardboard plants in the Leningrad and Moscow regions.
The company’s mills produce 75% of pulp, 20% of cardboard and 10% of paper on the Russian market. Every year, Ilim produces more than 3.6m tons of pulp and paper products. The company employs 17 thousand people.