International Paper and Ilim Pulp, the largest forest products enterprise in Russia, have signed a letter of intent to establish a 50-50 joint venture, the largest foreign-domestic alliance in the Russian forest sector.

The joint venture would be created through International Paper purchasing a 50-percent equity interest in Ilim Holding. The total valuation of Ilim Holding in the joint venture is approximately $1.3 billion. The joint venture's board of directors would include equal representation from International Paper and Ilim Pulp and would be headquartered in St. Petersburg.

Ilim Pulp operates four pulp and paper mills located in the European and Siberian regions of Russia, and produces approximately 2.5 million tons annually of market pulp, uncoated papers and packaging. Ilim Holding is in the process of consolidating ownership of the individual mills into a single Russian open joint-stock company, Ilim Group, a subsidiary of Ilim Holding.

A key element of the proposed joint venture strategy is a long-term investment program in which the joint venture would finance and invest approximately $1.2 billion in the four mills over approximately five years. This unprecedented investment in the Russian pulp and paper industry would be used to upgrade equipment, increase production capacity by approximately 1 million tons (40 percent), and allow for new high-value product development.

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