International Paper's deal with Graphic Packaging is credit positive

International Paper Company's announcement to transfer its North American consumer packaging business to Graphic Packaging International Inc. (Ba1 stable) for $660 million in cash and a 20.5% interest in the combined business is credit positive. The transfer will improve IP's margins and enable the company to focus on retained operations that have stronger competitive positions, higher return characteristics, and better long-term growth prospects. Moreover, the deal structure reinforces IP's commitment to deleveraging to 3x by the end of 2018.

Headquartered in Memphis, Tennessee, IP is a leading global producer of packaging products, market pulp and uncoated freesheet paper, with sales of about $22 billion for the twelve months ended June 2017. The transaction is expected to close in early 2018, subject to the receipt of regulatory approval and other customary closing conditions.