Koch Industries Subsidiary to Buy Part of Georgia-
Wichita, KS, Jan. 30--A subsidiary of Koch Industries has signed a letter of intent to buy a slice of lumber and paper giant Georgia-Pacific for $610 million, which includes the assumption of $73 million in debt, according to the Wichita Eagle.
KoCell LLC, a new company created specifically for the transaction, will acquire the nonintegrated-fluff and market-pulp operations of Georgia-Pacific.
Nonintegrated fluff is used to make such items as disposable diapers, baby wipes and sanitary products. Market pulp is used to produce fine papers, postage stamps, tissue products and coffee filters.
The transaction, expected to close in the first quarter of 2004, includes pulp mills at Brunswick, GA, and New Augusta, MS, a short-line railroad serving the New Augusta mill and two international sales offices. Combined, the operations employ about 1,100 people.
The acquisition moves Koch into a commodity market in which the Wichita-based oil, gas, trading and investments company has no history.
But it does fit into the Koch strategic plan of finding companies that offer an opportunity for using its strength in commodity marketing.
"Pulp and paper is another commodity industry that goes through cycles and has a volatility that we, as a private company, have better ability to manage than does a publicly traded company," said Koch spokeswoman Mary Beth Jarvis.
Jeff Gentry, senior vice president of Koch Industries, said Koch hopes to apply its operating, marketing and trading experience in other commodity businesses to position the new company for even greater success in the future.
Georgia-Pacific will use the expected $535 million after-tax cash proceeds to repay debt.
"The transaction is another step in Georgia-Pacific's ongoing efforts to focus on differentiated businesses," said A.D. "Pete" Correll, chairman and chief executive.
The annual fluff-pulp capacity at the Brunswick mill is 826,000 tons. In 2002, the New Augusta market-pulp mill had a capacity of 628,000 tons.
The sale is contingent on regulatory approvals and completion of agreements.
