Memphis-based International Paper Co. (NYSE: IP – $57.51) has agreed to combine its North America consumer-packaging business with Graphic Packaging Holding Co. in a transaction valued at $1.8 billion. Under the deal, International Paper will receive a 20.5% stake, valued at $1.14 billion, in the resulting consumer-packing business and use $660 million in cash proceeds from a loan being assumed by Graphic Packaging to pay down existing debt. IP said the deal allows the company to benefit from Graphic Packaging’s consumer-packing business, while helping it to remain focused on its core businesses. The transaction is expected to close early next year.
International Paper posted decent third quarter results last week, and the shares continue to have appeal for patient accounts with an eye toward income. The issue is not without risk, however, but the stock offers a high dividend yield of 3.3% and potential for above-average long-term capital gains.