VOL. 127 | NO. 183 | Wednesday, September 19, 2012
IP Looks to Future Following Temple-Inland Acquisition
By Bill Dries
When International Paper Co. moved its headquarters to Memphis in 1987 it was an economic development milestone for Shelby County.
Memphis had lost to Spring Hill, Tenn., for the Saturn car plant just a few years earlier. Southern states were among the most competitive in the nation in the wake of a late-1970s to early 1980s recession in which Memphis and other cities saw their factories and manufacturing companies begin to turn into the rust belt.
Memphis Mayor Dick Hackett and Shelby County Mayor Bill Morris at the time went to New York to meet with IP executives who would be making the move to the city. And among the questions they fielded were whether Memphis International Airport could handle big commercial passenger airlines and whether the streets were paved.
Twenty-five years later, International Paper is a global company that has changed several times over as the world market has become broader with emerging economies where there were no markets before and no way to get to them.
The latest transformation of IP was pronounced completed earlier this year by CEO John Faraci with the acquisition of Temple-Inland of Austin, Texas, capping the period of change.
And that acquisition is among the reasons International Paper is now looking for more headquarters space.
“In an effort to meet current and future office space needs for its global headquarters, International Paper is evaluating options for additional space,” read a written statement from the company late last week. “We are not ready to go into detail about the evaluation process at this time, nor what those options are. We can say that this is a necessary and important step as we plan for International Paper’s future.”
The three-sentence statement doesn’t indicate whether the options for more space might take the company out of Memphis.
But several months ago Faraci talked about the Temple merger in terms of jobs it might bring to Memphis.
“Our Memphis footprint is more or less the same as we integrate Temple – the possibility that some more jobs will come into Memphis,” Faraci said in an April interview with The Daily News. “Temple is pretty much a North American-based company and we’re not going to be operating out of Austin.”
“In an effort to meet current and future office space needs ... International Paper is evaluating options for additional space.”
Faraci told analysts last week at the UBS Global Paper and Forest Products Conference that Temple’s integration into International Paper is going faster than anticipated.
“Eighty-five percent of what they do is what we do,” he said at the New York City conference.
“Temple was shipping a lot of boxes a lot of miles, running a lot of box plants 24/7. We looked at that and said that doesn’t make a lot of money.”
Faraci also told analysts the worldwide company “has not been and will not be a bigger is better strategy.”
IP is not a stranger to mergers and integration. The company’s acquisition of Weyerhauser in 2008 has been used to some degree as a model for the Temple Inland acquisition, although Faraci has said the two are a bit different.
“We bought the company, not the business,” Faraci said in April, referring to Temple.
Weyerhauser came three years after IP took another big step away from the corporation it was when it moved to Memphis in 1987.
IP sold its timberland holdings in 2005 and the cash generated led to the repositioning of International Paper, Faraci said.
The company’s chief financial officer, Carol Roberts, spoke Sept. 6 at the Bank of America Merrill Lynch Industrial and Materials conference in Boston.
Roberts’ take on IP “post-transformation” is that it is more weighted toward packaging than paper.
“The one thing we are convinced of is there is more earnings potential in the company,” Roberts said. “We still have some debt we need to repay.”