Labor Day weekend for International Paper’s John Faraci and Temple-Inland’s Doyle Simons proved to be more than burgers on the grill and time off from work. As reported by Ernest Scheyder of Thomson Reuters, the chairmen of their respective companies got together that weekend and hammered out a deal that calls for IP purchasing all of the outstanding common stock of Temple-Inland for $32.00 per share in cash ($3.7 billion), along with IP to assume $600 million in Temple-Inland’s debt.

Total value of the deal: $4.3 billion.

This whole thing began back in May when Faraci verbally tossed a deal to Simons, which was followed by a meeting and a couple of letters. At the time, IP was offering to buy all of Temple’s outstanding shares for $30.60 per share ($3.3 billion).

But, Simons and Temple’s Board on June 4 in writing flatly rejected IP’s proposal, basically stating, “...your unsolicited proposal grossly undervalues Temple-Inland and its future prospects.”

On July 12, IP cranked it up a notch and brought the deal directly to Temple’s shareholders announcing the start of a fully financed tender offer of $30.60 per share for Temple’s stock.

In an earnings call with analysts on July 28, Faraci reinforced his company’s stance on the deal by saying, “...we’re committed, we’re serious, we’re patient, we’re disciplined. If things change at some point in time, and we think the right thing for International Paper is to do something else, we’ll make that call. But we’re serious and we’re committed to this and we’ll be disciplined.”

I’ve had the opportunity to interview John Faraci twice in the past 5 years and if I had only one word to describe him from a “doing business” standpoint, it would be “focused.” He doesn’t offer speculative views and isn’t much into wishful thinking. Situations are what they are and plans are created to deal with them. He’s sort of the like the Bill Belichick of the paper industry.

In an interview with FOX Business Network’s Ashley Webster, Faraci offered his thoughts on $3.7 billion purchase of Temple-Inland.

“We thought this was a good value at 32 dollars a share. This is a very compelling acquisition for International Paper. It will generate a lot of cash. The logic has always been there. This had to be a transaction that made sense for Temple shareowners and International Paper shareowners, and at the end of the day the boards of both companies concluded that it did.

“This is an investment in a business we are already in, and in a cost reduction opportunity to improve the efficiency of both businesses. I wouldn’t say it is a bullish bet on the economy but a realistic investment in a business that will enable us to be more successful going forward and withstand some of the competitive pressures that are there in a tough economic environment.”

The final sentence of his remarks is a great one and the reason IP has been so successful since John Faraci became its chairman and CEO in November 2003. He focuses on the things his company can do and, to a strong extent, control. In other words, IP can’t control the economy, but the economy won’t control IP.

The combination of IP and Temple-Inland would increase IP’s share of the North American corrugated-packaging market to about 40% from its current 27% (approx.). The deal is also expected to yield synergies of $300 million annually within 2 years of closing, which is expected in the first quarter of 2012.

“The world moves on and we’re committed, we’re serious, we’re patient, we’re disciplined.” — John Faraci, Q2 2011 earnings call.

Amen to that.

John O'Brien can be reached at: jobrien@paperage.com

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