International Paper Inc. will be allowed to go ahead with its $3.7 billion acquisition of smaller rival Temple-Inland Inc. after reaching a settlement with the Justice Department's antitrust division.
The settlement announced Friday calls for the combined company to sell three containerboard mills within four months of the deal's closing. The plants set to be divested are Temple-Inland mills in Ontario, Calif., and New Johnsonville, Tenn., and International Paper's Hueneme, Calif., facility.
There is the potential for two 30-day extensions for selling the plants, which represent 970,000 tons of containerboard mill capacity. The Justice Department must also approve the buyer or buyers of the mills.
As it was originally proposed, the combined company would have controlled about 37 percent of North American containerboard capacity, the Justice Department said in a statement. Corrugated boxes made from containerboard are used to ship more than 90 percent of all goods nationwide, it noted.
The deal in its original form would have "substantially lessened competition in the production and sale of containerboard," the department said.
International Paper is the largest producer of corrugated packaging in North America, while Temple-Inland is the third-largest. The two companies said Friday that they expect to close the deal soon.
Memphis-based International Paper said in September it was acquiring Austin, Texas-based Temple-Inland for $32 per share. The deal also includes $600 million in debt.
Shares of International Paper rose 12 cents to $31.60 in afternoon trading, while Temple-Inland's stock added 12 cents to $31.99.