The news from the biggest paper and forest products company in the world was, well, about not being so big.

International Paper on July 19 said that it would “evaluate strategic options” that included potential sale or spin-off of: the company's 50.5 percent stake in Carter Holt Harvey, its Coated and Supercalendered (SC) Papers Business, including the coated groundwood mill and associated assets in Parana, Brazil; the Beverage Packaging Business, including the Pine Bluff, Ark., mill; the Kraft Papers Business, including the Roanoke Rapids, N.C., mill; Arizona Chemical; segments or potentially all of its 6.8 million acres of U.S. forestlands; and the Wood Products Business.

Those businesses account for about 30 percent of IP's 2004 sales (including intercompany sales) and $925 million, or 40 percent, of operating profits, IP told the press.

The move away from being a diversified paper and lumber giant to a trimmed-down global paper and packaging company with a narrower focus follows the recent divestiture trend that includes fellow industry players such as MeadWestvaco and Georgia-Pacific.

The restructuring strategy implemented by these companies key on three important areas: emerging/growing global markets, divestment of businesses with the least growth potential, and the reduction of debt. All of these goals, if accomplished, should result in improved returns and a renewal of investor interest—both of which the paper industry has seen too little of.

Here is what John Luke, chairman and CEO of MeadWestvaco, said in mid-January after reaching a deal to sell the company's Papers business and associated assets for $2.3 billion. "Immediately, the sale allows us to reduce the company's debt, return value to shareholders and position the company for profitable growth. It also enables us to concentrate more of our resources on capturing growth opportunities in the global packaging markets."

During the past few years, Georgia-Pacific's chairman, Pete Correll, also has dramatically refocused his company, selling off paper mills and timberland, slashing debt, and narrowing the company's focus on consumer products markets all over the world.

Likewise, John Faraci, IP's chairman and CEO, has run out of patience waiting for the condition of IP's traditional markets to swing back to an up-cycle and decided enough is enough.

"This isn't about being big. It's about being successful," Faraci said in a conference call with analysts. “We're not waiting for the market cycle to improve."

To that declaration I tip my hat to him.

It's possible, just possible, that the paper industry is becoming less cyclical than history will allow us to believe. If this is true, then producers have to move closer to their markets, instead of waiting for their markets to come to them.

PaperAge. Copyright © O'Brien Publications, Inc. All rights reserved.