International Paper Co. (IP) agreed to acquire as much as a 75% stake in a leading Indian integrated paper manufacturer for about $361 million, in a deal that will position the company as the first global paper and packaging company with a significant presence in that country.
Separately the paper-and-pulp company's board raised its dividend by 40%, which it said lifted the payout above pre-recession levels.
Under the deal to acquire a majority stake in Andhra Pradesh Paper Mills Ltd. (502330.BY), International Paper agreed to purchase a 53.5% stake from Bangur Group Executive Chairman L.N. Bangur and family members and affiliates for about $257 million. The company also has agreed to a $62 million noncompete payment to the sellers.
International Paper also will launch a tender offer to acquire up to an additional 21.5% of Andhra Pradesh Paper Mills for about $104 million.
The deal amounts are based on an exchange rate of INR45 per U.S. dollar. The deal, set to close as soon as the third quarter, requires approval of Indian regulators.
Separately, International Paper's dividend was raised to 26.25 cents from 18.75 cents, which will cost the company an additional $32.6 million a year. Chairman and Chief Executive John Faraci said it was the company's third dividend increase in the past 12 months.
International Paper saw its top line improve last year, driven by strength from emerging markets. Manufacturers and industrial companies in general have been posting improved results in recent quarters as demand has rebounded from woeful levels in early 2009.
The company in February reported that it swung to a fourth-quarter profit on strength in its industrial packaging unit, beating analysts' estimates, despite weaker margins.
International Paper shares closed Monday at $27.60 and were inactive premarket.