S&P says IP's ratings, outlook unaffected by Temple-Inland acquisition, citing TI's competitive cost positions in corrugated packaging, building products; combined entity to have estimated 33.5% share of North American containerboard capacity

Sandy Yang

NEW YORK , February 13, 2012 (press release) – Standard & Poor's Ratings Services said today that its ratings and outlook on Memphis, Tenn.-based International Paper Co. (IP; BBB/Stable/--) are unchanged following IP's announcement that it has completed its acquisition of Temple-Inland Inc. for $32 per share in cash.

For the rating, we expect adjusted leverage of approximately 3x and FFO to debt greater than 25% given our assessment of the company's "satisfactory" business risk profile (as our criteria define the term). We expect that the combined entity's good cash flow generation, coupled with proceeds from mill divestitures, could result in repayment of debt and credit measures being maintained in-line with these levels within the next 12 to 18 months.

The transaction provides an estimated $300 million of annual run-rate synergies to be achieved within 24 months of close and we expect it to be accretive to earnings within 12 months excluding one time costs. In addition, we expect IP to benefit from Temple-Inland's competitive cost positions in corrugated packaging and building products and above-average forward integration. Following a successfully completed merger, the combined entity would have an estimated 33.5% share of North American containerboard capacity.

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