Unisource Worldwide, Inc. and xpedx Agree to Merge

- New publicly held distribution company to create enhanced platform for profitable growth across Packaging, Print and Facility Solutions

NORCROSS, Georgia, Jan. 28, 2014 /PRNewswire/ -- Distribution solutions businesses Unisource Worldwide, Inc. ("Unisource") and xpedx will merge under the terms of a definitive agreement that would result in the creation of a new publicly traded company. The agreement to merge the two businesses was signed by International Paper (NYSE:IP), parent company of xpedx, and by UWW Holdings, Inc. the holding company of Unisource and owned indirectly by an affiliate of Bain Capital and by Georgia-Pacific, as well as certain of their affiliates.

Upon the expected completion of the merger in mid-2014, which is subject to certain closing conditions, the new company will have projected annual revenue in the range of $9 billion to $10 billion and will have about 9,500 team members across more than 170 distribution centers in North America. The new company is expected to generate approximately $200 million in synergies.

Allan Dragone, chief executive officer of Unisource, said, "This merger will create a new company with  unique capabilities that will enable better service to customers across their core business segments of packaging, print and facility solutions. Building upon the strengths of both Unisource and xpedx, we believe the new company will be able to accelerate and enhance top-line growth opportunities across a complementary portfolio."

Seth Meisel, a member of the Unisource board of directors and a managing director at Bain Capital, stated, "By bringing together these two businesses, we will be able to provide customers with innovative solutions and ideas to solve their toughest challenges in product packaging and fulfillment, paper and print management, supply chain and logistics services, and facility solutions. The new company will offer an unmatched combination of reach, product depth and service capabilities."

Transaction Details

The transaction will be accomplished through a Reverse Morris Trust structure.  International Paper will contribute the assets of xpedx to a newly formed wholly owned subsidiary, xpedx Holding Company, in exchange for the stock of the subsidiary, a cash payment of approximately $400 million expected to be financed with new debt in the new company's capital structure, as well as the potential for an additional cash payment pursuant to an "earn-out" in the sixth year after closing. The subsidiary will be spun off into a new company.    

Following the spinoff of the new company to International Paper shareholders, UWW Holdings, Inc. will immediately thereafter merge with and into the new company. Immediately following such a merger, Unisource will merge with xpedx. In connection with the merger, the shares of UWW Holdings, Inc., will be converted into a number of shares of the new company such that, following the merger, approximately 51 percent of shares of the new public company will be owned by International Paper shareholders, with the remaining approximately 49 percent of shares held by a new holding company, UWW Holdings, LLC. The new company intends to apply to list its shares for trading on the New York Stock Exchange. UWW Holdings, LLC may request to register its shares of the new company with the SEC for resale beginning 180 days following the closing of the merger, pursuant to the terms of a Registration Rights Agreement to be entered into between the new company and UWW Holdings, LLC.

To finance the cash payment to International Paper and refinance existing debt of Unisource, the new company has entered into a commitment with three banks for $1.4 billion of asset-backed financing. The new company's debt-to-EBITDA ratio is targeted to be in the range of 4-5. The new company will be well positioned to generate solid cash flow for operations and reinvestment in the business while adequately servicing its debt.

The new company's executive offices will be located in the greater Atlanta area. In addition, the new company will retain the two existing operational headquarters of the legacy companies in Norcross, Ga., and Loveland, Ohio.

Leadership & Governance

Mary Laschinger, currently president, xpedx, and senior vice president, International Paper, will be the chief executive officer of the new company and chairman of its board of directors. Dragone will serve as a director of the new company and will advise on integration activities. The other directors will be:

• Lead Director William E. Mitchell, retired chairman and chief executive officer, Arrow Electronics, Inc. and founder of Sequel Capital Management, LLC
• Daniel T. Henry, retired executive vice president and chief financial officer, American Express
• Tracy Leinbach, retired executive vice president and CFO, Ryder System, Inc.
• John Zillmer, retired chairman, president and chief executive officer, Univar, Inc.
• Michael Muldowney, former CFO and interim CEO of Houghton Mifflin Harcourt Publishing Co., and founder and CEO of Foxford Capital, LLC
• Charles G. Ward, partner, Perella Weinberg Partners, and former president, Lazard Ltd.
• Seth Meisel, managing director, Bain Capital

Barclays and Goldman, Sachs & Co. are serving as financial advisors, and Kirkland & Ellis LLP is serving as legal counsel, to UWW Holdings LLC.

About Unisource Worldwide, Inc.

Unisource Worldwide, Inc., headquartered in Norcross, Ga., helps enterprise-level companies improve bottom-line performance by providing innovative, sustainable, highly efficient solutions across the life cycle of core business operations, including product packaging and fulfillment, paper and print management, general supply chain and logistics, and facility supplies solutions. Unisource has offices and operations in key locations around the world, and is currently ranked as one of the largest privately held companies in the United States. With a global workforce of approximately 4,300 team members located throughout business units in the United States, Canada, Europe and Asia; and more than 12 million square feet of supply chain capacity and a fleet of "Big Red" trucks based at approximately 85 warehouse locations across North America, Unisource is a partner to many of today's leading global organizations. Unisource can be found online at www.unisourceworldwide.com.

Certain statements in this press release regarding the agreed-upon transactions may be considered "forward-looking statements," such as statements relating to expectations for the new company, whether and when the transactions will close, the expected revenue of the combined company, the capabilities of the new company, the new company's leverage and the new company's ability to generate solid cash flow. These statements may also be identified by words such as "intend," "expect," "anticipate," "will," "implied," "designed," "assume" and similar expressions.  These statements reflect the current views of Unisource Worldwide, Inc.'s management and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied in these statements. Factors which could cause actual results to differ include but are not limited to:  (i) the receipt of regulatory approvals relating to the transactions and the successful fulfillment or waiver of all other closing conditions without unexpected delays or conditions; (ii) the successful closing of the transactions within the estimated timeframes; (iii) industry conditions, including but not limited to changes in the cost or availability of raw materials, energy and transportation costs, competition the companies face, cyclicality and changes in consumer preferences, demand and pricing for the companies' products; (iv) global economic conditions and political changes; and (v) other factors that may have a material effect on the new company's business.  Unisource undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. 

This press release does not constitute an offer to sell or the solicitation of an offer to buy any securities and shall not constitute an offer, solicitation or sale in any jurisdiction in which such offer, solicitation or sale would be unlawful. 

SOURCE Unisource Worldwide, Inc.