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IP and Ilim Holding joint venture


August 21, 2007
By Pulp & Paper Canada

The definitive agreement to form a 50:50 joint venture between International Paper and Ilim Holding S.A. is the lar…

The definitive agreement to form a 50:50 joint venture between International Paper and Ilim Holding S.A. is the largest foreign-domestic alliance in the Russian forestry industry. The Russian Federal Antimonopoly Service approved the deal in June, and it is expected to close in the fourth quarter of this year.

Ilim Group, a subsidiary of Ilim Holding, S.A., operates the largest pulp and paper mills in the European and Siberian regions of Russia, annually producing more than 2.5 millions tons of market pulp, uncoated papers and packaging. According to the terms of the agreement, International Paper will purchase 50 percent of Ilim Holding for approximately $650 million. The proposed venture calls for a long-term program to invest approximately $1.5 billion in Ilims four mills over approximately five years for upgrading equipment and increasing production capacity. New product development, specifically for high-value uncoated paper, pulp and corrugated packaging is also a part of the investment strategy.

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This deal is cited as a win-win for both companies. Ilim Group Chairman Zakhar Smushkin stated, this alliance is an example of cooperation between Russian and international companies toward effective development and processing of Russian forest resources. I hope this alliance will not just give a powerful impetus toward Ilim Group-s development but will also open the way for the inflow of investment and know-how that our industry so badly needs. International Paper Chairman and CEO John Faraci noted, as we continue to transform International Paper, focusing on our global uncoated paper and packaging businesses, the joint venture with Ilim positions us very well within low-cost, high-growth markets in Russia and Asia.

The joint venture will operate as Ilim Group, headquartered in St. Petersburg, Russia. The board of directors will be chaired by Mr. Smushkin and include four members each from International Paper and Ilim group. CEO of the venture will be International Papers senior vice president Paul Hebert. IPs pulp and paper mill in Svetogorsk, Russia, and Ilims wood products enterprises will not be integrated into the joint venture.


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