International Paper Agrees to Sell Beverage Packaging, Arizona Chemical Businesses; Sales Valued at $985 Million

International Paper has signed two definitive agreements related to the sales of its beverage packaging and Arizona Chemical businesses for combined proceeds of approximately $985 million. The transactions are both subject to certain adjustments and conditions at closing, including receipt of regulatory approvals.

The agreements are part of International Paper's transformation plan. Proceeds from all transformation-related divestitures announced to date, including beverage packaging and Arizona Chemical, total approximately $11 billion.

"These agreements bring us close to completing the divestitures planned as part of our transformation, and I'm extremely pleased with the progress we've made in 2006 to become a more focused, more profitable company," said John Faraci, International Paper chairman and chief executive. "Exiting these businesses is the right step for International Paper and our shareowners, but I don't want to lose sight of the contribution the businesses and their employees have made to this company. They have a legacy of strong leadership, talent and commitment, and I know they'll continue to succeed."

Beverage Packaging

International Paper has agreed to sell its beverage packaging business to Carter Holt Harvey, Ltd., for approximately $500 million, subject to certain adjustments. The transaction is expected to close in the first quarter of 2007, subject to various closing conditions, including receipt of regulatory approvals and other customary conditions.

The sale of the beverage packaging business to Carter Holt Harvey will allow a very profitable business to continue growing. "This is an exciting opportunity for our employees, our customers and our communities to continue to build on the success we've achieved. We're proud of our history and look forward to taking the business to new heights with our new owners," said Scott Murchison, vice president and general manager of the beverage packaging business.

The beverage packaging business includes gable-top beverage converting facilities in Massachusetts, Michigan, North Carolina, Florida, California, and Ontario and Quebec, Canada; the Evergreen Packaging manufacturing facility in Iowa, and the Pine Bluff mill in Arkansas. The business also has wholly owned subsidiaries in China, South Korea and Taiwan, and joint ventures in Latin America, Israel, and Saudi Arabia.

The business employs approximately 3,000 employees and produces more than 680,000 tons annually of high-quality packaging for juice, dairy and other products, and coated groundwood paper. The business had net sales of approximately $860 million in 2005.

Carter Holt Harvey is Australasia's leading forest products company with market leading positions in the building supplies, pulp, paperboard and packaging markets. CHH's building supplies division operates a number of large scale, integrated, low cost sawmill, wood processing and panels facilities in Australia and New Zealand. The pulp, paper and packaging division consists of four of New Zealand's largest pulp and paperboard mills, along with vertically integrated carton and corrugated packaging operations that provide customers with a range of integrated packaging products and services. For the 12 months ended Dec. 31, 2006, CHH expects to record net sales in excess of US$2 billion and has 7,500 employees.

Arizona Chemical

International Paper has agreed to sell its Arizona Chemical business to Rhone Capital III L.P. for approximately $485 million, subject to certain adjustments. As part of the transaction, International Paper will acquire a minority interest of approximately 10 percent in the acquisition vehicle to be formed by Rhone Capital. The transaction is expected to close in the first quarter of 2007, subject to certain customary closing conditions.

"We are excited about the sale of Arizona Chemical to Rhone Capital. We look forward to the opportunity to work with their leadership team to further grow our business as a global leader in the pine chemical industry," said Gerald Marterer, vice president, Arizona Chemical. "Arizona Chemical is an excellent team of talented people with a well respected brand and an outstanding customer base worldwide. Our business has been a solid contributor to International Paper, and we expect to continue to thrive under new ownership."

Arizona Chemical has been a global leader in pine chemistry for more than 75 years. The company is headquartered in Jacksonville, Fla., and supplies high-quality pine chemicals to the adhesives, inks and coatings, and oleochemicals markets.

Arizona Chemical has 11 manufacturing facilities worldwide, located in Panama City, Pensacola and Port St. Joe, Fla.; Savannah and Valdosta, Ga.; Dover, Ohio; Bedlington and Chester-le-Street, England; Niort, France; Oulu, Finland; and Sandarne, Sweden. Arizona Chemical also has research and development capabilities and a network of sales offices throughout the world, including a research and European headquarters in Almere, Netherlands, as well as a research laboratory in Savannah, Ga. The company employs nearly 1,500 team members.

Rhone Capital specializes in mid-market leveraged buyouts, recapitalizations and partnerships with particular focus on European and Trans-Atlantic investments. The acquisition of Arizona Chemical will be an investment of Rhone's third private equity fund.

International Paper