International Paper Initiates Tender Offer to Acquire All Outstanding Shares of Temple-Inland

July 11, 2011 (Press Release) - International Paper Company today announced that it is commencing a fully financed tender offer for all outstanding common shares of Temple-Inland Inc. for $30.60 per share in cash. The all-cash offer represents a 46% premium to Temple-Inland's closing price on June 6, 2011, the last trading day prior to public disclosure of International Paper's proposal to acquire Temple-Inland. The offer will commence tomorrow and will expire at 5:00 p.m. New York City time on August 9, 2011, unless extended.

International Paper chairman and CEO John Faraci said, "We believe Temple-Inland's price expectations are unrealistic and their unwillingness to engage in any meaningful discussions with respect to value has left us with no alternative but to make our offer directly to Temple-Inland shareholders. While we prefer to reach a negotiated, friendly deal, we are committed to remaining disciplined and completing this transaction at a fair price for both companies' shareholders. We are confident in our ability to secure the necessary regulatory approvals to complete this transaction in a timely manner."

Faraci continued, "We respect Temple-Inland, but we disagree on the realistic standalone value of the company, which we believe is currently $21 to $24 per share. The premium we are offering is substantial, the multiple is well above recent directly comparable transactions, and we are providing Temple-Inland shareholders the certainty of cash in the midst of a very uncertain economic environment. At $30.60, we believe our offer fully reflects the future business plans and economic outlook for Temple-Inland and for the sector, including the current environment and outlook for containerboard, the potential cyclical improvement in Temple-Inland's building products segment and near-term expected increases in Temple-Inland's earnings. We are confident that Temple-Inland shareholders support a transaction, and it is now incumbent upon the Temple-Inland Board to take the next step."

International Paper noted that its fully financed, all-cash offer represents compelling value when compared against all reasonable metrics and precedents, including:

  • A 46% premium to Temple-Inland's closing price of $21.01 on June 6, 2011, the last trading day prior to public disclosure of the offer
  • A 30% premium over the present value of average analyst price targets for a standalone Temple-Inland of $23.57
  • A highly attractive multiple of 9.8x Temple-Inland's 2011 estimated EBITDA (9.0x excluding timber tax liability) versus forward EBITDA multiples of recent precedent transactions of 6.1x for Smurfit-Stone and 6.3x for Weyerhaeuser's corrugated packaging business, and well above Temple-Inland's average forward EBITDA multiple of 6.1x since 2008
  • The fact that IBES research estimates for Temple-Inland's EBITDA have come down since International Paper's proposal was made public, given market expectations
  • A significant premium to Temple-Inland's standalone value which, based on pre-offer trading and independent analyst estimates of Temple-Inland's earnings potential, International Paper and third parties credibly estimate at $21 to $24 per share. This compares to Temple-Inland's contention that standalone value should reflect multiple expansion to near 7x applied to an above-average estimated EBITDA for 2012 a view we believe neither investors nor third parties share
  • Realization of the benefits from a potential cyclical improvement in Temple-Inland's building products segment, even with a recovery uncertain and likely years away
  • The benefits of more than half of the synergies that are expected to result from the combination
  • The certainty of cash, versus the uncertainty of any potential future benefits to shareholders that Temple-Inland's current business plan may, or may not, deliver through cyclical and operational improvement

International Paper has secured committed financing from UBS Investment Bank, and the offer will not be conditioned on financing. The offer will be conditioned on there being validly tendered and not withdrawn at least a majority of the total number of Temple-Inland shares outstanding on a fully diluted basis, Temple-Inland's Board of Directors redeeming or invalidating its "poison pill" shareholder rights plan, the receipt of regulatory approvals and other customary closing conditions as described in the Offer to Purchase.

International Paper also is filing notification tomorrow with the Federal Trade Commission ("FTC") and Department of Justice ("DOJ") as required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR). The HSR waiting period will expire on July 27, 2011 unless extended by the FTC or DOJ, which would not be unusual in these circumstances.

The Offer to Purchase, Letter of Transmittal and related documents will be filed tomorrow with the U.S. Securities and Exchange Commission (SEC). Temple-Inland's stockholders may obtain copies of all of the offering documents free of charge at the SEC's website (www.sec.gov ) or by directly requesting copies of all of the offering documents free of charge at Innisfree M&A Incorporated, the Information Agent for the offer, at (877) 456-3488 (toll-free). Banks and brokers may call collect at (212) 750-5833. The tender offer will expire at 5:00 p.m. New York City time on August 9, 2011, unless extended in the manner set forth in the Offer to Purchase.

International Paper's dealer managers for the tender offer are UBS Investment Bank and Evercore Partners. Its legal advisor is Debevoise & Plimpton LLP.

International Paper is a global paper and packaging company with manufacturing operations in North America, Europe, Latin America, Russia, Asia and North Africa. Its businesses include uncoated papers and industrial and consumer packaging, complemented by xpedx, the Company's North American distribution company. Headquartered in Memphis, Tennessee the company employs about 59,500 people in more than 24 countries and serves customers worldwide. 2010 net sales were more than $25 billion.

SOURCE: International Paper